Snowden Effect May Hurt Demand for US Cloud Datacentres

Revelations about NSA could create demand for business in other regions of the Americas. In the last of three reports on datacentre location economics, Nick Booth examines North America.

Revelations about NSA could create demand for business in other regions of the Americas. In the last of three reports on datacentre location economics, Nick Booth examines North America.

When choosing a datacentre for your North American business, there’s a wealth of factors that have to be considered, according to Sune Christesen, who composes the Data Center Map, a guide to the global datacentre market. The primary considerations would be the likelihood of natural disasters and weather, climate, geology and the likelihood of man-made problems like terrorism or industrial disputes. Secondary factors in the US are the workforce and business climate because the US is generally well positioned in terms of its skilled workforce, the quality of life on offer, and the government and business culture.

Historically, the US has been the leader in providing cloud computing services across the globe, dominating every segment of the market. In the 2013 Informa Cloud World Global Insights survey, 71% of respondents (of whom only 9% were from North America) ranked the US as the leader in cloud computing usage and innovation. In this same survey, 9 out of 10 respondents linked cloud computing to their country’s economic competitiveness.

However, recent revelations about the extent of government agency surveillance of private data may exacerbate concerns about locating datacentres in the country. The lengths to which the National Security Agency (NSA), and other US law enforcement and security agencies, have exploited the Foreign Intelligence Surveillance Act (FISA) and Patriot Act to snoop on foreign electronic data is forcing foreign companies to consider their options, according to a report from the US- based Information Technology and Innovation Foundation, which suggests that that the post-PRISM concerns could cost US cloud computing firms up to $35bn in the next three years if foreign companies feel storing data in the US is too risky.

Meanwhile, a stable banking sector, strong consumer spending and a solid economic outlook are making Canada a preferred location for foreign investors seeking safety and growth, according to Cushman & Wakefield’s Data Centre Risk Index 2013.

Datacentre options in North America


Despite natural disasters like tornados and Hurricane Sandy in New York and New Jersey, the US is still generally a low-risk location. The ability to recover from Sandy impressed analysts and the US still has the highest internet bandwidth capacity of all the countries measured by the International Telecoms Union (ITU) and the average cost of electricity, while not the cheapest, has stabilised and is relatively low. And obviously the ability to establish local connections to an enormous and wealthy business and consumer sector makes the US a magnet.


The costs of Canadian labour and energy have reduced since last year, according to the World Bank. Canada’s international bandwidth is ranked 11th in the world, which is surprisingly low given how established the datacentre market is. The construction of a new submarine broadband cable is due to be completed in 2014 and should bring better links to global commercial markets. Canada attracts increasing investment from operators and occupiers and its cold climate is perfect for free cooling.

A snapshot of Latin America

In the meantime, growth in Latin American economies is predicted to outpace that of their North American neighbours, according to both the World Bank and the Economist Intelligence Unit (EIU).


Its telecoms industry isn’t too competitive so bandwidth is expensive in Mexico and lack of investment in infrastructure means it’ll stay that way, but Mexico still has great economic potential as a strategic hub between the US and Latin America. New competition may drive changes in the telecoms sector too.


Hard fact: between 2013-15 a number of submarine cables such as the Wasace project are expected to be installed, improving the Brazil’s connectivity. Soft fact: economists have a joke about Brazil: it’s the nation of the future – and it always will be. Somewhere in between the hard opportunity and soft perception lies the truth.

There is a significant opportunity in Brazil but high energy costs and a difficulty in doing business there, along with high inflation and taxation, count against it, says the Data Centre Risk Index 2013.

Whether the expected acceleration of infrastructure projects – accelerated by the World Cup and Olympic Games – ever materialises is a moot point.



Nick Booth worked in IT in the UK’s National Health Service, financial services and The Met Police, witnessing at first hand the disruptive effects of new technology.