Nearshore Americas

Trinidad’s Energy Costs Reduce Data Center Expense and Bring Enterprise IT Value

Corporations doing business in Trinidad and Tobago stand to benefit from low energy costs in this dual island nation. Often reported, abundant natural resources and government subsidies have long supported low utility costs for businesses. For outsourcing, the cost factor is typically one of the primary decision drivers; placing Trinidad and Tobago in a strong position due to low overhead. Sourcing executives have a mandate to save dollars, identify resources and consider their choices wisely. In recent Nearshore Americas research, respondents agreed that the low energy costs in Trinidad and Tobago were attractive to their organizations.

Utility Costs in T&T

Low energy costs show up pretty clearly in the corporate budgeting process. As documented in the InvestTT story, “at less than US $0.06 cents per kilowatt-hour, Trinidad offers one of the lowest electricity rates in Latin America and the Caribbean.” In comparison, U.S. utility costs can be at least double that rate depending on location. According to the United States Energy Information Administration’s March 2014 report, costs in New York City are in the range of $0.1654 per kilowatt-hour and $0.145 per kilowatt-hour in New England, where large financial services organizations would typically find the type of professional staff needed to resource a financial services operation.

ScotiaBank, a company that had previously invested in Trinidad and Tobago, opened a new service center in the region during 2013 and would concur with the fact that savings are substantial when it comes to energy expense. According to a September 2013 article reprinted in Pride from InvestTT Online, the financial institution was attracted partly due to its previous business experience in the region. Both cost savings and geographic location were important factors.

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Deep Roots in Oil and Gas

Natives of the region will tell you that the Trinidad and Tobago economy is based around natural gas. History, however, shows that oil has had a strong presence as well. The region’s energy minister, Kevin Ramnarine, was quoted as saying in a FuelFix blog post that Trinidad and Tobago produces “about 4.3 billion cubic feet of natural gas per day and 82,000 barrels of oil per day.” In the same blog post, Ramnarine says that “Trinidad and Tobago has been commercially producing oil since 1908, so it’s one of the oldest oil-producing countries in the world. It predates oil production in the Middle East.” This has created an energy-based economy and one that appeals to companies needing to lower expense.

“Trinidad and Tobago has overtaken El Salvador to be ranked as the most cost-effective location in the Caribbean and Central American region. An abundance of oil and gas reserves, accounting for about 40% of GDP and 80% of exports, make the country a wealthy nation compared with many of its neighbors. Cheap energy prices combined with low operating costs have attracted investors in low-cost industries.” This perspective was detailed by the fDi Intelligence report Caribbean and Central American Countries of the Future 2013/14.

Energy Cost Value in Outsourcing

Why does this matter to the outsourcing industry? It boils down to cost effectiveness. Data center overhead represents a significant cost; a variable expense that will certainly be passed along to customers of outsourced service providers. According to InformationWeek’s Network Computing article by Tony Kontzer published in January, data center trends for 2014 include a continued focus on energy cost control.

Kontzer states up front that “Data center operators will continue to focus on energy efficiency…” referring to the continuing trend that was top-of-mind in 2013 with many creative solutions for reducing environmental footprint. IDC research, led by research analyst Jennifer Koppy, was also quoted as saying that “…in a recent survey of 400 data center managers, IDC found that reducing energy consumption ranked as their No. 1 priority.” This trend will help Trinidad and Tobago drive its low energy cost messaging to market.

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Future Considerations

Of course, energy expense is not the only factor to consider in data center or sourcing destination decisions. Trinidad and Tobago has no intention of resting on its history and natural resources. In October 2013, Michal Kaczmarski explained in an fDi Intelligence commentary that the government’s intention in Trinidad and Tobago is to pursue other natural avenues for growth. The article cites Jeff Pappas, principal of Cresa Dallas, a site selection consultancy based in the US, who says “Oil and gas jobs are lucrative, but hard to come by, so quality opportunities for young professionals are limited.”

Furthermore, Pappas believes US companies also consider labor resources: “for US companies looking to outsource some parts of their operations, opportunities are plenty. Trinidad and Tobago is home to 12 post-secondary educational institutions and each year sees approximately 5,000 new graduates joining the country’s workforce.” While power efficiency and low cost are appealing, other factors are boosting Trinidad and Tobago’s standing as a potential outsourcing location.

Lisa Erickson-Harris

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