Verne Global outlines Iceland data centre plans

| May 25, 2010

Two years after we first published the Icelandic government’s plans to promote the building of data centres on its shores, a venture capital-backed start tup, Verne Global, is looking to make it a reality.

Verne Global, backed by General Catalysts from Boston, Novator in London and the Wellcome Trust, is now constructing a wholesale data centre in Iceland. The idea, according to the company, is to leverage the inherent benefits of Iceland, namely abundant, clean power, cool climate, as well as the availability to international bandwidth and tech skills, to build a facility that will be able to compete against data centre offerings on either side of the Atlantic.

The business model seems simple enough and is covered pretty well by Iceland’s marketers. In this interview we speak to Jeff Monroe, CEO of Verne Global, about his business model, the benefits of Iceland as a data haven, and why the recent volcanic activity is actually good for his company.

Green Telecom Live: What’s the vision behind Verne Global?

Jeff Monroe: Our core offering is a wholesale data centre provider. what that means is we provide space, power, cooling and physical security for companies who operate computer servers for online operations. So in essence, we are the base infrastructure for companies that need computing power, and so Verne Global, our motto is to find the world’s optimal server aggregation point in the world, and develop wholesale data centres so that customers can take advantage of those optimised locations.

Now, what is making this possible is – in the early days of the Internet, there is Mae East and Mae West and in the Docklands in London and these were the primary Internet connection points – there was very little metro fibre and there was very little long haul fibre, so data centres by and large had to be located in these areas where the main connections are. Over the years, metro fibre rings have expanded, long haul fibre capacity has expanded, and has allowed companies – one of the leaders being Google, to take applications and put them in more optimal areas verses in congested, expensive, inefficient metropolitan locations.

For the record, what are the advantages of having your facility in Iceland?

One of the things is when we talk about an optimised server aggregation point is you start to go through what aspect of a data centre, from an operational stand point, are most important. One of the key elements is the power source. You probably have seen news about companies who own and operate their own data centres have selected locations that, for example might be fed by a coal fired energy source, so something that is not environmentally friendly – and companies are starting to take a lot of heat for that – being asked to look carefully at the best location. So the energy source is a key element in selecting a location and Iceland is one of those places that checks that box more completely than anywhere else. It has all geothermal and hydroelectric energy, so all the energy on the island is renewable and it is also plentiful. The infrastructure is young with a high industry base, which allows it to be extremely efficient. It also allows us to provide to customers a 20 year visibility into power prices. We are able to, today, fixed energy prices, with an escalator, for up to 20 years, which is unheard of anywhere else in the world. So the energy piece is a big chuck.

Another piece is cooling. As you know, these data centres uses a lot of energy and produces a lot of heat as that energy is converted to operating servers, it creates heat which needs to be ejected from the data centre. Iceland happens to be a climate that allows us to do 100% free cooling. What’s important about this is that there are locations in the world where you can do some portion of free cooling because through the seasons, the temperature might be right for it. But even if you can do free cooling for 300 plus days a year, if you can’t do it for the full year, you need to put in all of the infrastructure for a chilling plant to be able to cool the environment and that has refrigerant, it has operational expense, etc. So Iceland is optimal because it allows us to do year round free cooling because it is in the North Atlantic. However it is dominated by the Gulf Stream flow so it keeps the temperature in Iceland in a range of not being high, and not being too low – it is kind of in a sweet spot for data centre environmentals.

The other thing you look for is abundant connectivity. One of the things that makes Iceland an opportunity now is that, just last year, a full cable system was completed that the government of Iceland was thoughtful enough and proactive enough to put in. This is a multi-redundant, multi-Terabit modern cable system that connects Iceland with Europe and with North America.

So now, you have all these great attributes and you are able to offer them to customers via this cable system that was installed.
One of the other fantastic attributes of Iceland is you have a very modernised, very educated society, English speaking, tech savvy society. So you have this amalgamation of qualities that check the box in every way for having an optimal location for data centre.

The last point, which is on everyone’s mind because it is a current event, which is the volcano eruption that happened recently. The other thing you look at for data centre is how can I find a highly protected location because no matter where you put a data centre – if you put it on the East Coast of the US, you have hurricane risks, tornado risks, thunder storm risks, in the Northeast [of the US], you get snow risks, in the Central [US] you have flooding risks, and on the West Coast [US], you have earthquake risks, so really, every region has to deal and content with mother nature.

One of the fantastic things about our site in Iceland is it was a former NATO air base, base of command. The military is very good at picking strategic locations and our site happens to be situated in 1.5 million year-old bedrock. It happens to be upstream from the volcanic activity, so what we just witness here is – literally a live test of sorts with regard to the location of the site and how it will react to a natural event like this. As you saw, what happened was the volcano erupted and where did that ash cloud get carried because of the prevailing winds? Directly over Europe. Our site remained clear. The power was never interrupted. The communications was never interrupted. So you had this event, which created a huge impact in a region that I think many people couldn’t have conceived would have been impacted from a volcano in Iceland.

All these pieces kind of fit together and form a puzzle and Iceland is a place when you put all the pieces together, it’s a very complete picture.

Was it a difficult task convincing the investment community to back your business model?

I have to tell you, when you are dealing with an investor base that had a couple of qualities – one is a long range vision, and two, an investor that looks for definitive trends – industry trends, market trends in things that are driving the market in a certain direction, it actually wasn’t very challenging.

Our three investors right now are, General Catalysts, which is a venture capital firm in Boston, Novator, which is an investment firm in London, and the Wellcome Trust, which is a fund that will back our entire first phase, and really, if you look at the Wellcome Trust specifically, you are talking about an organisation that has very, very defined investment objectives, they really look for strategic opportunities in things that they feel are going to be important over the long term, not just the short term. So I think if you are looking for somebody that doesn’t have that strategic vision, or that long term vision, then yeah, you could be in an situation where an investor, or a management team for that matter, who are just reactive to current things that are happening. What we are doing is we are looking more strategically, and we have a more long range view – because whether it’s carbon legislation, climate change issues, the upward pressure that is going to resume in energy prices, all of those things we believe are going to just continue to drive the importance of what we have to offer.

Is the facility up and running?

The facility is not up and running presently. What we have is our office there, which is up and running. The data centre component itself has been developed in a modular fashion. What that means is there’s multiple phases to it. You’ve got the underlying power infrastructure, you have the cooling infrastructure, you have the tenant fitted out infrastructure. What we have done is we have completed the underlying power infrastructure, and we have the shell buildings there, and we have our first phase carved out. As we work with our potential customers towards going live, that will define the tenant fit out area, so that will trigger the completion of that data centre environment.

We are doing it in a very modular fashion, whereby our design is very flexible with regards to customer requirement and we build based upon customer demand. That modular fashion allows us to that.

Does that mean you are adopting container-based modules?

There’s a lot of different environments where you can put servers to operate in, so whether that is a raised floor environment, whether that is a container. For our first phase, it will be a raised floor environment, not a container environment, but that raised floor environmental will be segmented into very distinct customer suites. So rather than having a very large open data centre with the cages in the middle, we are actually developing individual customer suites.

The beauty of the wholesale model is it allows a 2MW or 4MW data centre user, who is completely inefficient from a monetary standpoint and an operations standpoint. This allows companies who need that demand to come into an environmental where they are a part of a larger data centre and it allows them to reap all the rewards of the efficiency driven by that larger data centre. For example, in a single building, we are going to have six distinct customer suites, so each suite is going to be developed based on that customer demand, in a very modular fashion.

Containers are one potential solution, but that will be driven by the customer because that is such a customised solutions. Because the container kind of wraps about the servers that is really a customer specific discussion.

When do you expect the first customer to sign up and go live?

We are in the yellow line process and I can only say, and I hope you can appreciate this – the customers that we are dealing with, we are under pretty strong NDA, so all we are saying is we are working with potential customers and the ultimate delivery of the space will be based upon what their requirements are. So we are not going out to the market and quoting a specific date, or specific time that we are going to turn up the first phase, because it really depends upon what that customer need is.

So what has been the response from potential customers?

I can tell you in an absolute fashion, and this is pre-volcano and post-volcano, that the response that we’ve had has been incredibly positive. In some cases, this is more so after the volcano because again, this is something that happens – the last time that volcano went off was over 100 years ago – so it’s only so often that you actually see a live test of that magnitude and be able to see the resilience of the infrastructure and the location of the data centre.
As companies continue to drive towards more efficient operations, it’s going to drive applications to places like Iceland.

Have customers expressed any kind of concerns whatsoever? For one thing, connectivity – even though there is a new cable, Iceland only has a total of three-four cable systems, so in terms of redundancy, you can only get two routes per direction, has this been an issue for customers in terms of diversity and obviously price?

First and foremost, if you have just one cable, this wouldn’t work because people will not be single-tethered. If you have two cables, it would work for some, and I would argued for many. If you have three cables, that’s crosses the threshold for most. Iceland has the ability, you’ve got a cable into Blauberg, you’ve got a cable into Ireland which connects via terrestrial into London, you’ve got a cable through Greenland into North America, then you have the TAT cables, which run trans-Atlantic connecting the North America to Europe. So you do have multiple paths and I can tell you from a redundancy and resiliency standpoint, with the customers we are talking to, we have had no concern from that perspective.

From a pricing standpoint, if you have a data centre that is sitting on top of an exchange and a data centre that is some distance away, inevitably, there is going to be some level of transit costs, but the cost savings that we can drive through the efficiency of the data centre, through the savings in the energy, and you’ve got a government in a country who is extremely aggressive to drive data centre business into Iceland and into our site, you’ve got all the makings of an extremely attractively price model.

Once that volume starts to build, that builds upon itself to be able to offer lower and lower prices.

At this point, do you have any competitors? Are you the only company building data centre in Iceland?

We are the only company building wholesale data centres in Iceland right now. Iceland has very, very small co-location style data centres, but as far as a large scale wholesale data centre, we are the only one in Iceland right now. I would anticipate that you will see others follow our lead.

Will you be targeted enterprises, or more service providers?

It will be both. They can be enterprise level customers, or service provider level customers. It will be fantastic backup site for governments. We are really across the spectrum of customers that we are talking to.

Besides Iceland itself, will you have physical infrastructure, like POPs, on either side of the Atlantic?

Because we are a wholesale provider, and because the customers that we are going to have is going to be large, more sophisticated customers, those customers will essentially handle their own connectivity needs. What we are will be facilitators for those needs. What we are talking about is very big, savvy, sophisticated companies who will be our customers, and therefore they will handle the connectivity themselves.

What is the role of Icelandic government in this? I know they actually been quite aggressive in this area, did they play a part in your decision making process in terms of subsidies and anything like that?

I’ll answer that in two ways. Number one, the government has been extremely supportive and as you say, very positive and wanting to drive this industry in Iceland, for a multitude of reasons – for diversity of their economy, for job creation, etc. Relatively to specific incentive, we do have an excellent relationship with the government. We do have quite a few initiatives and those incentives and initiatives are dealt with on a case by case basis between us and our customers. We don’t go out actively in the press and state what those are but they are definitely in place. That is part of the government, or a municipality, participating and helping an industry get off the ground.

Are you staff mostly local? Are all the skills there?

That is correct. All the skills are there. Keep in mind, and I’ll give you a couple of example. Iceland is a huge, huge market for the aluminium smelting industry, so the country is not unfamiliar with extremely large industrial projects. Data centres are very much a factory of sorts. Number two is CTP Games, which is one of the top multiplayer online gaming companies – and I don’t mean gambling, has their operation in Iceland. So there’s a very tech-savvy staff there.

You’ve got a country, where Reykjavík is as modern as any modern city in the world and it has a very sophisticated population.

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