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Location is more important than risk

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Here’s some good news for Nordic countries.   A study named Iceland as the least risky place to put a data center, with Norway, Finland and Sweden also in the top five. The UK and the US had both dropped: they were at numbers nine and ten respectively, having fallen from the top two positions when the study was last done.

But what do we mean by risk - and how important is it when we are siting a facility? This report, from US property management company Cushman and Wakefield, is free to download, and is based on a mathematical forumula for it that takes into account factors including power, bandwidth, political stability and natural disasters - so we can at least see how a real estate player sees risk.

Aurora Borealis above Kirkjuffell in Iceland

Aurora Borealis above Kirkjuffell in Iceland

Source: Thinkstock / Nikolay Pandev

The game of Risk 

In all, 37 countries are included. The most attractive location, Iceland, gets 100, while the UK and US are on 80 and 79. China (50), India (48) and Nigeria (35) are at the bottom of the list that get considered at all by the report.

But how are the numbers produced? The report takes ten factors, including energy security and the likelihood of natural disasters (including the ability to cope with them). It multiplies those by a weighting factor, and combines them to produce a single figure - which I guess is then scaled so the winner gets 100.

Cushman and Wakefield decided which factors got the heaviest weighting. So a rating for natural disasters makes up around 15 percent of the score, followed by political stability, contributing 13 percent. Three factors - bandwidth, energy security and “ease of doing business” are each weighted at about 12 percent each.

From the sheet of data, it’s clear that Iceland scored well, because of its ability to deal with natural disasters, and its political stability and energy security. No surprises there.

Operators are now more concerned about political stability and natural disasters than they were before

But why the big change since the previous report in 2012? It seems that’s because the goalposts moved. The report’s authors asked a survey of 4000 professionals what factors they considered important, and changed the weightings. Operators are now more concerned about political stability and natural disasters than they were before, apparently.

So the UK and the US have lost their gloss because priorities are changing.

Overall, the report is only an indication of how happy people might be doing business in any country, but it doesn’t take into account how much they need to be there. Many companies have to be close to their customers, for reasons including trust, politics and latency.

The cloud makes data centers more mobile than they used to be, but proximity is still important, as the report says: “Whether the risks outweigh the proximity picture, and corporates begin to realign real estate accordingly, is yet to be seen.”

Factor the risk and carry on

If you have a free choice, you can pick based on these factors, but if you need a data center in India then you will carry on and build there anyway, factoring in the risk that this report sees there. Amazon has done just that recently.

Data centers still get built in Nigeria, and in many of the other 159 countries in the world that don’t even feature on this report, whetever the risk figures say.

Each country has its own risk profile. If you need a data center there, check that risk along with all the other negatives, and compare it against your commercial opportunity and the business requirement. Then decide what to do.

Related images

  • Aurora Borealis above Kirkjuffell in Iceland

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