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Data Center

European Datacentre Options Appeal in the Post-NSA World

In the first of three features on the state of datacentre location options around the world, we examine Europe.

The recent news that American law enforcement and National Security Agency (NSA) take electronic data from any company that hosts data in the US, has made some companies rethink their cloud computing and hosting strategies. The frequency with which the Foreign Intelligence Surveillance Act (FISA) and US Patriot Act are used as justification to snoop on private firms is making many foreign customers decide the risks of storing data with a US company outweigh the benefits.

The US cloud computing industry stands to lose $22bn to $35bn over the next three years as a result of the recent revelations about the NSA’s electronic surveillance programmes, according to the Innovation Technology & Innovation Foundation (ITIF) think-tank.

In a 2012 policy document titled Unleashing the Potential of Cloud Computing in Europe, the European Commission (EC) called for a number of steps to promote cloud computing adoption in Europe, including creating pan-European technical standards, EU-wide certification for cloud computing providers, and model contract language. Recent events have made politicians and analysts take more notice of this White Paper.

German Interior Minister Hans-Peter Friedrich has argued that any company that fears its communications could be intercepted should never use services that go through American servers. Justice Minister Jörg-Uwe Hahn called for a boycott of US companies.

Analyst Clive Longbottom, principal researcher at Quocirca, says governance is now becoming the critical factor for outsiders choosing a home for company data in North America. “If you have any worries about government snooping, make sure you find a friendly country - and only you can define what friendly means,” says Longbottom.

But what are the risks and benefits of hosting data in European data centres? Which countries are best placed?

For Europeans, Germany, France and the UK still hold the trump cards in this market because of their leadership in bandwidth, latency and political stability, but the energy crisis is making Scandinavian countries a much more attractive proposition.

But each country then has its own, unreported, nuances. Some countries have everything you need except the local expertise and experience of running data centres. For each region, we will attempt to provide a review of all the hard and soft intelligence on its suitability as a home for your intellectual capital.

Within each country, a two-tier market is emerging says Sam Kemp, corporate director for technology, media and telecoms team at banking giant Barclays.

“On one side we see continuing strong demand for highly connected, city centre sites being used for critical IT systems where premium prices are common. On the other we see out-of-town or even out-of-country alternatives for less critical and less time-sensitive applications,” says Kemp.

In these second-tier markets the price and the ability to tailor facilities for the client’s needs are increasingly being the deciding factors.

“We still see a reluctance from businesses to use sites that are too far away,” says Kemp. “Many have an inherent desire to visit their site in a reasonable time, even if the technology or service developments mitigate this requirement.”

UK

The UK is highly ranked thanks to its international internet bandwidth capacity and good scores for ease of doing business. Energy costs are worrying though and have continued to rise. The UK’s heavy reliance on fossil fuels scores poorly for sustainability and energy security. Will the issue of energy security affect the UK in the future?

“In our experience, people in the UK want to host their data in the UK,” says Dominic Monkhouse, EMEA managing director of Peer 1 Hosting. “Power is only a small element of our costs; it is significant but not the driving consideration. Cost and speed of connectivity will offset this power cost saving. We will not have power cuts in the UK in the future; if it's an issue we can run on generator power.”

Currently there are plenty of empty datacentres in the UK, following a building boom. With the owners finding it difficult to fill them, there’s plenty of choice for companies to host their data.

Czech Republic

Europe is expected to see accelerated growth and investment opportunities both in the mature hubs and the emerging markets. Harnessing the opportunity, delivering the right product and breaking through barriers to entry will be key to both provider and occupier.

Eurostat says the Czech Republic is one of the few nations where the comparative cost of energy is falling. However, the International Telecoms Union (ITU) doesn’t rate the Czech Republic’s international bandwidth and the World Bank is not impressed by the ease of doing business there.

Finland

Like all Nordic nations, Finland can enjoy free cooling for data centres and is ranked as least likely to suffer a natural disaster, according to risk analyst Maplecroft. However, the ITU warns that Finland has not made sufficient investment in international bandwidth. Political stability is an asset in Finland, but that’s offset by its reliance on energy from Russia.

One of the undocumented drawbacks can be lack of access to networks, or indeed the network of your choice, says colocation expert Tim Anker, MD of consulting firm the Colocation Exchange.  

“Mega-large users like Facebook or Google who built their own facilities can pull in networks to them,” says Anker. Smaller colocation users, in a small-population country like Finland, won’t be able to dictate, however, so there might not be a huge range of networks.

France

France has abundant energy thanks to its nuclear power but the World Bank says its advantages are neutralised by the difficulty of administration there. High labour costs and levels of industrial action make it hard to do business in France, it says. The recent political instability has also caused France to rank outside the top 10 destinations in the world for a data centre, according to Cushman & Wakefield, hurleypalmerflatt and Source8’s  Data Center Risk index 2013 . 

Germany

Though its taxes and labour costs are high, so is its ranking. Plentiful internet bandwidth capacity, political stability and low inflation compensate. But, like Britain, Germany is becoming less attractive as a destination thanks to its rising energy costs.

“Sometimes efforts to be green can lead to higher pricing,” says Tim Anker at the Colocation Exchange. “In Germany, power costs for data centre users are 20 to 30% higher than in the Netherlands or the UK, partly due to Germany's energy policy.”

Iceland

Once the highest ranked Nordic country in The Data Centre Risk Index, the infamous volcanic ash cloud still casts a symbolic shadow over Iceland’s data centre industry. High labour costs and a flatlining growth in international network capacity have also made a negative impact. Once the Emerald undersea cable connects the US, Canada and UK to Iceland, it could become a great ‘off the beaten track’ destination if you get in early.

Ireland

Low corporation taxes lured some significant data centre residents, notably IBM and Microsoft. However, conducting business in Eire has got harder in the last decade, according to the World Bank. The Economist Intelligence Unit also reports it has comparatively high labour and energy costs.

Netherlands

A favourite destination for data centres, the legacy of being a seaport is a plentiful supply of cableships, which made this the best connectivity hub for mainland Europe. The cost of labour has gone down and, despite rising sea levels, it is ranked as a low risk from a natural disaster. Political stability is neutralised by the low ‘ease of doing business’ rating relative to some near neighbours, including the UK.

Norway

Norway has become increasingly popular as a destination thanks in part to what the World Bank says is its strong political stability and ease of doing business. Equally important, perhaps, is that Norway has a high availability of natural resources and over 90% of energy is produced from renewable sources. Increased investment is being made in the Norwegian data centre market with some US banks considering it as a home for their data.

Some analysts have questioned whether latency levels of six milliseconds are too high for international banking applications that run in the US, London and mainland Europe. “If banks could separate their data, they could [host] the less time-sensitive apps from here,” says Andy Lawrence, VP of research on data centre technologies and eco-efficient IT at 451 Research.

Poland

Many companies are replacing expensive domestic data centres with cheaper Polish versions on the back of lower labour costs and corporation tax. Being rich in surface-level coal creates cheap energy, a factor which analyst Maplecroft rates highly. All factors conspire to make Poland increasingly attractive, as many big companies are moving back office operations here.

Russia

With abundant water and energy reserves, its security and low power pricing are offset by the extreme difficulty of doing business, political instability and high rates of inflation.

Spain

Despite being an established data centre location with good international internet bandwidth, Spain’s downgraded economy, political instability and high energy costs are a deterrent.

Sweden

Sweden performs well in all categories except labour costs. Its sustainable energy has attracted Facebook as an investor, which then pulled in many telcos to provide the requisite bandwidth. With a very low risk of natural disasters and high political stability, Sweden is pulling in global players. Labour costs, says the Colocation Exchange’s Tim Anker, are far from the most important factor.

Switzerland

Even with low rates of inflation and corporation tax, Switzerland has fallen out of the top league of data centre destinations due to a lack of improvement to its international bandwidth capabilities. Labour costs are also high but for all other risk factors including the tier-one risks, its results are mid table.

Conclusion

The idea of a UK or mainland European company hosting data in Norway and Finland still seems anathema, despite financial arguments in its favour. Buyers are still put off by having to travel long distances to visit their data centre providers.

Any company that distributes high volumes of content will be a large bandwidth user, which means they need to live near strong network hubs. That is why the big established internet exchanges in London, Amsterdam and other hubs will continue to attract business to their vicinity.

Another powerful but undocumented reason why few datacentre hosts migrate is that the expertise has become localised. Britain is lurching toward a power crisis in 2015, according to warnings by national electricity and gas regulator OFGEM, but few datacentre owners or analysts interviewed cite this as their biggest challenge. Staff that have the experience of building data centres and running them have some of the rarest skills in IT. Recruiting these specialists is incredibly expensive and time consuming, so it’s often easier to take the datacentre to the areas where they live.

 


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.

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Nick Booth

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. As a journalist and analyst, his mission is to stop history repeating itself.

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