The servers are powered by renewable energy from tidal turbines and wave energy converters. This is a lot smaller than the conventional data centers that can cover the enter distance of a football field, some 300-feet.
"We think we actually get much better cooling underwater than on land", Ben Cutler, who is in charge of the project surrounding submerged data centers, told BBC.
In the second phase of a years-long pilot project, Microsoft has installed an underwater data center in the North Sea near Scotland's Orkney Islands.
The submerged data center includes 864 servers and 27.6 petabytes of storage - or almost 28 million gigabytes.
The experimental Northern Isles pre-packaged data centre operates some 36 metres below the surface, and is part of Microsoft's long term Project Natick program that started in 2014.
Moreover, Microsoft believes that placing data centers under the sea will also help fight corrosion, which remains a major problem on land.
Later in 2016, at DCD's Enterprise event in NY, the company said that the test had proved a success and that it would follow up with larger tests - now, in 2018, it appears that Microsoft is ready to do just that. Scotland's Orkney Island was chosen as the location because of its cooler sea temperatures.
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Microsoft announced the deployment of the data centre, named Northern Isles, on Tuesday.
The tech giant has been working on underwater data centers for a few years under the project called Natick, having conducted their first successful tests in 2016.
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.
The unmanned facility contains more than 860 servers and is expected to stay in place for a year, with Microsoft engaging with French submarine engineering company, Navel Group, to design the vessel.
Producing and deploying a subsea data center takes Microsoft about 90 days.
The units runs exclusively on locally sourced renewable power, with an expected life cycle of about five years (which Microsoft hopes to push up to 20 years). Combined with the cost savings from dealing with heat naturally and the security offered by being on the sea floor, you end up with what could be the obvious next step for data centers.