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Iceland's blueprints for a data center industry

Iceland is better known for Vikings and melodiously named volcanoes than for its data center industry, but with abundant low-cost energy, a climate suited to free cooling and a rapid uptake in IT-related fields, that could change.

Every company is an IT company in the age of ubiquitous computing, spurring data center growth outside metropolitan hubs in everything from big data analytics to content delivery.

Companies selecting data center sites in computing frontiers, rather than established IT locations, must consider the physical location's benefits as well as human talent and government regulations. These tips on how to encourage data center development in Iceland apply in other new markets, such as parts of the U.S. Midwest, China and Brazil.

Don't specialize too soon

Data center companies in Iceland have to be generalists rather than specializing in IT, colocation, infrastructure or platform as a service, or managed services. And they have to collaborate with users.

"There are [Icelandic] customers that just know their IT workloads, and look to Advania for advice on the equipment to use and whether to go with cloud or owned equipment," said Eyjólfur Magnús Kristinsson, managing director of Advania, which offers IT infrastructure hosting and data center services.

While wholesale colocation space is international data center company Verne Global's primary market, it works with a range of retail and wholesale colocation customers in its Icelandic campus.

"If we only offered 500 kw and up, we'd miss out on a lot of local customers," said Tate Cantrell, CTO of Verne Global, noting that colocation customers will grow their power and space demands in the coming years.

While there are still server-hugging companies that wouldn't move IT operations onto an island perched between the U.S. and Europe, Verne Global's team said few data center customers ever set foot in the space, so location isn't an issue.

"It's all remotely managed servers and infrastructure," Cantrell said.

Know your target workloads

The Icelandic data center industry hinges on a future direct route undersea cable to North America via AEConnect by AquaComms, since it connects globally via three cables, one of which is older and infrequently used. Icelandic data centers largely target certain workload types that require low connectivity and abundant power and cooling, such as high-performance computing or even disaster recovery.

What it lacks in connectivity speeds, Iceland makes up for in cheap, green, reliable power. Data centers consume more power than ever before, regardless of the workload type, and Iceland's draw as a nascent data center market is the ability to scale up an IT footprint without exorbitant power costs. Iceland's energy cost is 50% of the average per kilowatt per hour in the E.U., and the grid offers 100% green (geothermal and hydroelectric) energy.

"The data center market [has] been most rapidly growing. Not long ago, they weren't even a blip on our radar," said Jóhann Snorri Sigurbergsson, director of business development at power company HS Orka. Verne Global's Cantrell remembers a jumble of server closets in the local businesses when he first came to Iceland, far from the data centers being built today.

Data centers report 99.977% uptime from the grid, and two independent power lines is a default design. HS Orka, which claims to be the largest electricity provider to data centers in Iceland, also created a scheme to reduce the cost of power generation and distribution costs for data centers outside of the main developed business area around Reykjavík.

Build data center development expertise

Modular and pre-fab data center containers scale capacity up quickly and uniformly, as seen in Advania's Thor data center facility and Verne Global's first building.

Verne Global had experience with building highly reliable data centers, but it was a new thing locally, Cantrell said.

"Icelanders are experts at working with renewable energy and the weather, which is what they brought to the table," he said.

Established major industries in the area share some core expertise requirements with the incoming data center sector. In Iceland, data centers are hiring away electrical workers from the aluminum smelters and air control experts from fish processing sectors.

"New engineers can take mechatronic and electrical engineering classes in college, and maybe some classes on data centers, but we have to train them specifically on data center specifications and design," said Tryggvi Jónsson, managing director of infrastructure at Mannvit, a technical engineering firm that sees engineering, industry, construction and power all tied together.

Another option to mature the data center industry in Iceland is introducing low-redundancy, extremely low power usage effectiveness (PUE) sites, relying on the Icelandic power grid for uptime rather than backup systems, and even taking advantage of direct air cooling rather than heat exchangers. Advania is experimenting with Open Compute Project reference designs for direct cooling. Its Mjölnir data center strips out physical redundancy, both for low-reliability applications and distributed applications that have redundant architecture.

Foster an innovative IT sector

Pressure is high to add more skilled IT people to the workforce, both to run the data centers and to fuel the kinds of digitally savvy companies that will be their users. Data centers are not major job creators, but they do diversify economies directly and indirectly via IT ventures, said Sveinn Þorgrímsson, director general of the Ministry of Industries and Innovation, Department of Industry and Energy.

To rapidly scale up this data center and IT workforce, Reykjavík University offers diverse program lengths -- from undergraduate and masters to a two-year systems administrator degree to as short as a few months of training. It also collaborates with industry on student projects and on professorial jobs.

"Teaching sys admins the way we did [things] 10 years ago isn't helping anybody," said Ari Kristinn Jónsson, president of Reykjavík University, and a former computer scientist. Reykjavík University is also breaking ground on an incubator for startups, tying curricula to industry opportunities, especially foreign companies looking to acquire IP and staff.

Another way to fuel growth is economic clusters, where competitive companies share resources and ideas. Iceland has clusters for tourism and oceanic businesses, for example.

Inside Iceland's data centers

Green power and data centers are inextricably linked on Iceland. See how the power plants, economy and data centers of Iceland work in this slideshow tour.

Offer economic incentives

"Iceland is a small and unknown quantity to U.S. investors," said Thordur Reynisson, deputy director general of the Ministry of Industries and Innovation, Department of Industry and Energy, so the country has developed a framework of foreign investment incentives. The program's tenets target long-term investments, such as data center builds, with tax breaks and sponsored training trips for local employees to learn from company experts in other locations.

"You might want to build a data center in Iceland to take advantage of free cooling and 100% renewable power, and then hire local staff [who] need to be trained," Reynisson said. "If you go to the northwest of Iceland, you will not find anyone with experience working in a data center," he added.

From its 2008 banking crisis, Iceland also has the burden of financial controls to explain to foreign entities. Capital controls, which limit the ability of foreigners and foreign entities to take money out of Icelandic currency, are currently being liberalized, which could directly affect business investment.

Iceland also faces competition from other regions which offer tax breaks to grow their data center industries; at least 17 U.S. states created customized incentives for data centers in the past 10 years, according to real estate conglomerate CBRE Inc.

Is a data center industry viable?

Verne Global and Advania's Thor data centers are the only builds of international size and caliber today in the Icelandic data center market. Other smaller data centers are ramping up, some of which rely on cryptocurrency -- Bitcoin mining -- to bootstrap funding for stand-up data centers in the future.

"We associate a lot of risk with those type of customers," said Björn Brynjúlfsson, director of Icelandic startup Borealis Data Center, in reference to Bitcoin miners. However, the Icelandic climate and power costs suit the application well, providing Borealis with a foothold in data center operations before it builds a proposed Uptime Tier II or higher level site.

"Three or four data centers on the scale of Verne Global's campus would be enough to introduce competition and diversify the offerings to IT customers," Tryggvi Jónsson said.

The data centers visited on this tour all plan to open additional space, whether for high availability or low PUE/low redundancy occupants.

Meredith Courtemanche is the senior site editor for SearchDataCenter. Follow @DataCenterTT for news and tips on data center IT and facilities.

Editor's note: The visits to Verne Global, Advania and Borealis data centers as well as other Icelandic sites were sponsored by Invest in Iceland, an organization facilitating foreign direct investment business opportunities in Iceland.

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