Switzerland’s alpine fortresses spur start-up boom

Switzerland’s alpine fortresses spur start-up boom
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Switzerland wants to be world’s data bank. To this end, the Swiss are repurposing their nuclear proof mountain forts into ultra-secure data centers.

Switzerland has long prospered from its unique geo-political situation. Touting its neutrality, stability, and fundamental respect for privacy, Switzerland has become a leading banking nation. Yet as Bern signs banking deals with the U.S and other nations, Switzerland’s famous banking secrecy is slowing being eroded.

Seeking to capitalize on its existing reputation and expertise, Switzerland is establishing itself as a global leader in data processing and storage. To this end, the Swiss are employing a uniquely Alpine outlook: literally. Switzerland is turning its underground mountain fortresses into data centers.

Demilitarization offers start-up opportunities

Fearing Nazi invasion, Switzerland constructed an elaborate network of military fortifications and underground bunkers and fortresses. These installations were further expanded during the Cold War, as the Swiss installed anti-nuclear, biological, and chemical countermeasures. Known as the ‘Schweizer Reduit’ – or Swiss National Redoubt, this network formed the mainstay of Swiss military protocol for decades. Hundreds of installations housed thousands upon thousands of troops, vehicles, and even aircraft.

With end of the Cold War, this bunker network suddenly found itself without a raison-d’etre. During the early and mid-1990s the country underwent a massive demilitarization. The Swiss military shrunk from 625,000 in 1990 to 400,000 in 1995, and 200,000 in 2003. The country was left with 80km of underground munition caverns, 600 underground supply facilities, and 16,000 bunkers.

The 1990s set the country in motion to capitalize on the emergent cyber-security industry. During this time a group of enterprising entrepreneurs began to snap up the facilities. Hansruedi Wandfluh, CEO of Wandfluh Group explains that in the mid-1990s “I was enthralled by the idea of storing data from around the world in a nuclear resistant bunker in Switzerland.” Christoph Oschwald, CEO of SIAG – which bills itself as ‘The Swiss Private Bank for Digital Assets’ – is another such early investor. SIAG was formed in 1994, and Oschwald recalls that “[twenty-one] years ago, nobody took us seriously. They said to us ‘storing data under a mountain? Why?’”

Entrepreneurs like Wandfluh and Oschwald foresaw the emergent digital data revolution, and bet on Switzerland’s reputation, and its bunkers: Oschwald even named his new facilities Swiss Fort Knox (pictured below). The bunkers were the perfect platform: already highly secure, plentiful, and relatively cheap, as the military sought to unload facilities.

Existing technologies were also easily re-purposed for data storage. The drinking water reservoirs became cooling pools for servers. Bunker over-pressurization – designed to keep toxic particles out – worked wonders at keeping out dust and grime, and pre-existing generating stations ensured uninterrupted power supply.

Moreover, the physical security infrastructure placated client fears about the then still nascent paradigm shift towards digitization. The bunkers also added a sense of mystery, clout and James Bond flair, further distinguishing the Swiss brand. Sporting apocalypse-proof storage, the bunkers also attracted government and institutional clients (libraries, seed banks, art galleries), whose long-term outlooks necessitate hedging against one-in-a-billion potentialities.

Bunkers to bytes: Switzerland’s data gold rush

With 61 data centers, Switzerland is already Europe’s fifth largest data hub, with over $1 billion having been invested in data centers in the last five years. The University of Basel has estimated that space allocated to data storage and processing will increase by 63% by 2016. Furthermore, the revelations of Wikileaks and Edward Snowden came at a perfect time for the fledgling industry. Anke Rauterkus, CEO of BS Backup Suisse, notes that “until recently, many of our client’s data was hosted by American service providers. Due to the ongoing revelations surrounding the NSA etc. the confidence in our [foreign] competitors has been severely damaged.

Consequently, many clients have transferred their business to Swiss companies. Moreover, several American firms, such as Multiven and ProtonMail, have left Silicon Valley and relocated to Switzerland, citing Switzerland’s (unlike Washington and London) aversion to proposals banning encryption. Add to this the fact that the Swiss have some of the strictest privacy laws in the world – personal data is legally defined as a ‘precious good’ and can (barring a judicial order) under no circumstances be handed over, – and you have a perfect storm for growth.

Switzerland as the world’s data bank

Consequently, confidence among Swiss business leaders is sky high. Indeed “data storage is the new Eldorado for Switzerland. It’s a real boom,” according to Franz Grueter, managing director of Green.ch, a leading data storage firm, which has seen 30% annual growth since its inception in 1995.

Similarly, Carlos Moreira, CEO of WIseKey SA argues that “this is the future of this country: It is not to store anymore money, its actually to store data, which is the next currency. SIAG’s Oschwald fully concurs: “the point is, data is more valuable than money – because money is replaceable, data is not. What we need is a bank for data, and this is where the Swiss tradition is.” Swiss professionalism and discretion continue to be a selling point, with WIseKey reporting demand for its services growing by 300% a month in the wake of the Snowden affair.

This line of thinking has been embraced by both data storage firms and their tech ecosystem partners, driving innovation. Sticking with the banking analogy, D-Swiss has created SecureSafe, a digital safe-deposit-box protected by encrypted key codes, for storing banking information and other important documents, accessible anywhere in the world. Similarly, SecureSafe for Teams uses cloud technology to allow multiple users to share data. Unlike DropBox, data managed by SecureSafe is always stored in Switzerland, and protected by copies in several underground data bunkers.

The Alps have always been an integral part of Swiss identity. As a landlocked country with no natural resources, Switzerland has been forced to be entrepreneurial. The Alps perfectly represent this, initially utilized for construction material, later as defensive bastions, and later still as tourist meccas. Switzerland’s data boom is but their latest exciting chapter.

About Author

Jeremy Luedi

Jeremy is a widely referenced political risk expert and weekly columnist for Global Risk Insights (GRI). Jeremy's writing has been featured in Business Insider, Huffington Post, Nasdaq.com, The Japan Times, MSN Money, and Yahoo Finance. His work also has been quoted and recommended by Time Magazine, Politico, Transparency International, and Greenpeace, among others.