A very private practice

As global financing suffers increasing scrutiny and calls for change, the Swiss appear to be banking on data instead. Is there a market to be addressed?

For more than 100 years, companies and individuals have sought out Swiss banks to keep their money safe and their financial dealings private. Now it seems that the small, landlocked nation of Switzerland is being promoted as a place for storing data safely, secure from unwanted prying eyes - and some of the customers are from the UK.

The concept of a data haven is not especially new. HavenCo, a firm based in the Principality of Sealand - otherwise known as an abandoned WWII sea fort off the coast of Essex - announced in February its plan to launch a range of "private communications and storage services". The self-styled micro-nation has previously provided data hosting services to The Pirate Bay and WikiLeaks, so this is perhaps a natural evolution of its status and role.

The British government's Data Protection Committee forecast back in 1978 that one day, varying global privacy standards might encourage companies and individuals to seek out host countries with more favourable regimes for their needs.

However, a feasibility study on potential data haven services carried out the same year, dubbed Project Goldfish, was only meant as a joke.

In 2010, The Economist magazine predicted that Iceland could become the Switzerland of data. Meanwhile, services such as Tor continue to offer a kind of virtual data haven - and Switzerland itself appears to be setting out its stand, with a number of companies offering specialist data hosting targeting other countries.

The largest is a six-year-old Zürich firm called Artmotion, and Mateo Meier is its affable chief executive.

"What is quite interesting is that we did not plan to do this. It was just what came from market changes about three years ago, and went on from there," he says. "Switzerland has an interesting position if you look at Europe as an example because it is one of the only countries which is not part of the EU but yet has related advantages."

The company discovered it was attracting offshore customers, and when it asked customers why they had chosen Artmotion, 90 per cent said it was because of the Swiss location itself, with its political neutrality, stability, low risk of natural disaster and low levels of corruption.

Eighty per cent of the hosting provider's business comes from outside Switzerland, Meier (pictured, right) confirms.

"Fifty-five per cent of the customers come from ‘crisis' countries, where they are not so stable," he says. "Switzerland was known for banking, and since the banking crisis, a lot of people have come to understand that data itself has a certain value - and once data is lost, it is gone."

As reported in CRN, EU law may now operate to open up data hosted in European countries to the scrutiny of the US government, despite the increasingly stringent data privacy laws with which companies must comply. Meanwhile, the advance of cloud-based IT underlines that physical security is no longer a sufficient barrier against data leaks or breaches.

For executives such as Meier, there is no reason to suggest that Switzerland could not take advantage of recent trends to become a global capital for the hosting and datacentre market.

And according to an Artmotion statement, the only way to gain access to the data hosted within its two Swiss datacentres - one of which is underground - is by official court order proving guilt or liability, and this applies to all countries. "Unlike in the EU there is no special rule for the US," it suggests.

Artmotion's revenue has gone up 45 per cent year on year this year, Meier confirms.

Data privacy fears

Meier adds: "Switzerland's reputation for neutrality, privacy and independence and our advantageous tax system has always attracted some of the world's biggest corporations. Once it was banking and now they want to host their data in our country."

Artmotion serves a range of blue-chip clients in the banking, financial, oil and gas and retail sectors - including a number of UK companies - and customer confidentiality is enshrined in law. But it is not a no-questions-asked situation, he says, as all customers are screened before being accepted - the company has no desire to play host, as it were, to criminals.

The EU is being pushed to exert greater control over taxation, cracking down on evasion and shining a brighter spotlight on tax avoidance practices. A new tax accord with Switzerland is currently being negotiated. Could this spur the tiny Swiss state on to forge a new kind of secrecy business, this time around IT?

Dominic Monkhouse, EMEA managing director of managed hosting, cloud hosting and colocation provider Peer 1 Hosting, suggests though that a lot of the data privacy fears raised in the media may mostly reflect a kind of "paranoid geekiness" in the industry, or even among IT administrators, as much as in customers' minds.

Unless current laws are extended - and he concedes that they may be at some point - legitimate businesses surely have little to fear from government agencies and others monitoring their data from time to time.

"In my experience, people are more worried in hosting about things such as latency issues, or data processing issues - for which physical location can be important," Monkhouse says. "It all has to be close enough to the servers."

However, the fear of excessive surveillance and of authorities' misuse of data certainly exists in some sectors and among some groups of people, and so there may indeed be a market that can be addressed, he agrees. But many of the advantages promoted by companies in countries like Switzerland may also be offered by UK providers, he hastens to add.

"We currently host some stuff for politically unstable countries," Monkhouse confirms. "And because we are a global business, things come up such as the Patriot Act in the US, so we have some US customers who host in Canada because of that. But all the NATO countries have treaties of collaboration and co-operation in place."

Switzerland is not a member of NATO - but it does have a "security partnership" with the treaty organisation.

Monkhouse (pictured, right) says requests for data from the US government do happen at Peer 1, but only occasionally. They are normally routed to the UK arm via the Home Office.

Meanwhile, the UK - while a member of the EU - can still offer the same stability, technological advantages, human resource quality and low environmental risk as Switzerland while complying with a diversity of international law, he suggests.

In fact, according to global consultancy Cushman & Wakefield's Data Centre Risk Index 2013, the UK is the safest place in Europe to put a datacentre - with Switzerland coming only 11th. The US, perhaps counter-intuitively, came top of the list globally - partly because of its cheaper energy costs - and Sweden came third.

Perhaps the Artmotion story points the way to greater opportunity. Maybe UK IT providers could and should take a leaf out of Switzerland's book, and do more to promote this country as a safe haven for data from all around the world.