All data centers have servers that generate massive amounts of heat, requiring even more machinery to keep them cool and running. The company hopes that it'll eventually flawless this system of deploying data centers that are cheaper to run for years on end.
Data centers have always been criticized by environmental groups for their egregious energy use across the globe.
At the deployment site, a remotely operated vehicle retrieved a cable containing the fibre optic and power wiring from the seafloor and brought it to the surface where it was checked and attached to the data center before switching it on.
The data center is placed in a cylinder that was made by shipbuilder Naval. Since most of the world's population lives within about 120 miles of the coast, data needs to travel less distance to reach coastal people. Microsoft is looking for ways to provide better internet connections to coastal cities, where half of the world's population is located.
In phase two, which kicks off today, the company has fit 864 servers on 12 racks in a sealed submersible that's about the size of a standard 40-foot-long shipping container; it's created to function for five years without requiring any maintenance. The sinking of its data center into the sea off Scotland's Orkney Islands was intentional, reports the BBC.
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"When you are in this kind of exponential growth curve, it tells you that most of the datacenters that we'll ever build we haven't built yet", said Ben Cutler, leader of the Project Natick team in the release.
The sea offers ready and free access to cooling - which is one of the biggest costs for land-based data centres.
Cindy Rose, chief executive of the technology giant, said: "Microsoft is exploring the idea that data centres - essentially the backbone of the internet - can be based on the sea floor".
The island itself runs exclusively on renewable power generated by its own wind turbines and residential solar panels, and is also a sizeable testbed for tidal energy generation.
Overall, Microsoft's aims with Project Natick are not only to bring lower-latency cloud computing to a larger number of people - the company points out that nearly 50% of the world's population lives near coasts - but also to create a more environmentally friendly data centre.