This is the first in a series of blog posts where I discuss how Iceland meets many of the key evaluation criteria for financial services firms exploring potential strategic data center locations.
A recent report published by Citihub Consulting suggests that Iceland is ideally positioned to establish itself as a major hosting centre for US and European financial services firms.
While banks have considered Iceland as a data center location in the past, its appeal has increased since the Global Financial Crisis in 2008, as priorities in the financial services sector have evolved. A growing number of firms are now choosing to host strategic applications in the country, attracted by its data-friendly business environment, cost-effective infrastructure, 100% renewable – and green – power supply, and its workforce.
As a member of the EEA, Iceland’s politics, economy and most importantly, its legal system closely resemble full members of the European Union. That means that the country adheres to EU regulations governing financial services and data protection, and embraces the free movement of services and labour within the region.
Iceland’s infrastructure is unrivalled. The World Economic Forum recognises the country as a world leader in Internet connectivity and in the provision of secure internet servers. The Boston Consultancy Group ranks Iceland as the top location for a data centre in Europe and second to the US globally. And Cushman & Wakefield, in it’s 2016 Data Center Risk Index, ranked Iceland as the world’s safest location for a data center, obtaining 1st place (lowest risk) out of 37 nations based on ten variables including energy cost, connectivity, ease of doing business, level of corporate tax and political stability.
RELIABLE ENERGY GRID
In terms of power, Iceland outperforms other major economies. It has a robust, industrialised energy grid and uses less than 10% of its capacity, providing excellent power scalability. Meanwhile, the UK, along with many other countries, operate with small reserve power margins, and the US struggles with unreliable infrastructure due to lack of investment.
Another key draw is the country’s well- educated and highly skilled labour force. Estimates by Eurostat, the EU’s statistical office, reveal that Iceland has the highest percentage of workers employed in technology and knowledge- intensive industries in Europe.
Iceland’s geographic location also works in its favour, being strategically located between the global financial hubs of Western Europe and the east coast of the US. This opens up opportunities for firms to consolidate latency tolerant compute resources between the two largest financial markets, making it an optimal location for processes such as artificial intelligence and machine learning; research, development and testing of algorithms; and regulatory technology or ‘RegTech’.
Any financial services firm researching potential hosting locations should seriously consider Iceland. In my next few blog posts, I’ll explore in greater depth the various criteria discussed above as well as others including the cost of ownership, the country’s risk profile and Corporate & Social Responsibility issues.