Crain’s Chicago Business cited the cost at $500 million, with the datacenter occupying eight football fields in size. The facility should be open for operation by mid-2008.

The added infrastructure, along with similar projects varying in size and scope, give Microsoft the ability to compete with Internet powers Google and Yahoo on web services. Offering products like Office Live requires Microsoft to create a platform that won’t have a single point of failure.

The demand for web services like Software as a Service will abate if companies can’t satisfy demand reliably. This is what happened in the early days of client/server applications in the 1970′s, leading to the growth of the PC industry.

By spreading out capacity, Microsoft can ensure uptime and service availability, the competition has similar aims. While infrastructure doesn’t grab all the hype among tech industry observers, its importance along with companies spending big dollars on it shows the seriousness of the initiatives and the firms behind it.