Study ranks US least riskiest place to open data center

UK, Germany and Sweden follow as the least riskiest places to establish data centers, according to a survey released this week

Last year the U.S. was the least riskiest place in the world to open a data center, according to a study released this week.

The rankings, which were released by Cushman & Wakefield, Hurleypalmerflatt and Source8, were made after measuring risks related to physical, economic and social issues in the countries. The U.S. was followed by the U.K., Sweden and Germany, while Indonesia, India and Brazil were at the bottom of the list. The study ranked 30 countries.

The issues considered for the study are usually taken into account by companies when establishing data centers. The risk index included weighted ranking of energy, bandwidth, ease of doing business, tax, labor, political stability, sustainability, natural disasters, education, energy security, GDP per capita, inflation and water resources.

The U.S. remained at the top despite natural disasters such as Hurricane Sandy, which knocked out power supplies and left many data centers offline on the East Coast for weeks in October. The U.S. rated 29th out of 30 countries on natural disasters and ranked last on corporate taxes, but the establishment of data centers continued to grow as mobile device shipments increased and companies increasingly deployed public and private clouds.

"This is prompting strong demand for colocation data centers, as public and private cloud-based storage and backup providers emerge as viable solutions for outsourcing although organizations continue to struggle with security and access issues," the study said.

Data centers have been established by Facebook, Apple and Google in Oregon. The San Francisco Bay Area, northern Virginia, Las Vegas and Phoenix are also growing data center markets, according to the study.

Eight of the top 15 countries ranked were in Europe, and Sweden and Norway became hot spots for data centers, according to the study. Easy availability of hydropower and naturally available cool weather prompted many companies to establish data centers in Sweden. Scandinavian countries recorded the highest jumps, with Sweden rising five spots to third and Norway up four spots to eight.

The rest of Europe was on shaky ground. The U.K. ranked second because of Internet bandwidth and ease of doing business, but "heavy reliance on fossil fuels scores poorly for sustainability and energy security," according to the study.

France and Germany, which are major data center hubs, are being threatened by high labor costs and energy security. Despite vast energy resources, Russia, which ranked 24th, was considered a risky place due to high inflation rates, political instability and difficulty in doing business.

"The UK, France and others are facing a generation supply gap and clear strategy and investment policy is required from their respective governments," the study said.

But as LTE deployments grow, there will be a need for more data centers as more companies centralize applications and deploy private clouds. That should give new life to the European data center business, according to the study.

Economies in Asia are growing, but a range of issues, including poor connectivity, government rules and supply-chain problems remain challenges in establishing data centers, according to the study.

For now, strict regulations have made it difficult to establish data centers in China, but that could change in the future, according to the study.

The growing presence of foreign companies in China has increased demand for data centers with operational efficiency matching global standards, according to the study. That could pressure local operators and also create opportunities for new companies looking to establish data centers. Many data centers are in the Shanghai and Beijing areas, but data centers also have been built in Guangzhou, Chengdu and Shenzhen, according to the study.

Qatar, which ranked 10th, was rated as the lowest-risk place in Asia to establish a data center. But a number of companies, including Intel and Advanced Micro Devices, have established data centers in Malaysia in recent years. Malaysia was viewed favorably in the survey for a balance of low energy costs, low inflation rates and ease of doing business, but poor Internet connectivity and political instability remained concerns.

Agam Shah covers PCs, tablets, servers, chips and semiconductors for IDG News Service. Follow Agam on Twitter at @agamsh. Agam's e-mail address is agam_shah@idg.com

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