Game of Thrones country woos power-hungry data centres

Incentives

While analysts suggest remoteness as well as a small workforce could be behind Iceland's failure to attract big names for now, Invest in Iceland's Tomasson has a different theory.

"I think this is a game of incentives. Many countries are giving incentives to companies who decide to locate in the area," he said.

Danish finance paper Borsen, for example, reported earlier this year how the Danish tax authorities and foreign ministry highlighted tax incentives and how to use them to Apple before its decision to place a centre in Viborg in Denmark.

Microsoft meanwhile said it would build a US$250 million data centre in Finland, a promise which the government said would reflect good corporate responsibility after the tech giant cut thousands of jobs from Nokia's former mobile phone business.

In June, the Icelandic parliament agreed to offer investors in the country incentives that include a profit tax cut to 15 percent from 20 percent, a 50 percent real estate tax relief and to let companies depreciate assets completely.

"I think these new incentives are going to absolutely help us," Tomasson said.

For its part, Denmark plans to lower its corporate tax rate to 22 percent by 2016, and offer expat workers a reduced income tax of 26 percent for up to five years.

Data privacy is also becoming increasingly important to businesses, as underscored by the theft and release of details, including sexual fantasies, of people signed up to the Ashley Madison website which facilitates marital affairs.

In Iceland, privacy protection and transparency about how data is used has become a big issue since the grass-roots Pirate Party, with links to Wikileaks, became a top political force.

"Countries with restrictive data privacy regimes, such as Iceland, may be initially challenging to operate in from a regulatory point of view, but the data protection measures offered are highly attractive to customers who wish to maintain control over who has access to their data," Christopher Sherman, analyst with research firm Forrester, told Reuters.

Analysts say building data centres is a big decision and it is commonplace for options to be deliberated for 5 years, so Iceland has a good chance of becoming the go-to place.

"I think there is certainly an opportunity (for Iceland) – especially for workloads such as technical computing, high performance computing and lightweight consumer Web applications," IDC's Nebuloni said.

(Additional reporting by Ragnhildur Sigurdardottir in Reykjavik; Editing by Sabina Zawadzkiand Philippa Fletcher)