Web host server location impact on SEO

I was doing some research and came accross a (not new) Matt Cutts video about web hosting server location and it’s impact on SEO.
What I understand from that video (and from my personal experience with European websites hosted in a single country) is that Google used to only check for country specific TLD (Top Level Domain e.g .fr or .co.uk) to decide if the website was relevant for a certain country.
That was, like Matt Cutts says, back in the days.

Now, they still use the country code TLD but if they face a generic TLD such as .com or .org they check the host server country to determine the website’s relevance for specific countries.
.
But, they are also checking the IP of country specific TLD to determine if they are relevant for other countries.
I’ve seen some examples where .com.au websites were achieving high rankings in the UK SERPs because they were hosted in England
The important learning is yet to come: those websites were still ranking high in the Australian search engines.
They were not losing any rankings in Australia, they were just getting a boost in the UK.

So the main issue would not be about getting bad results in the country you target but more about getting good results in an irrelevant country, which will only happen if your website is in the same language used in the country your host is located (Canadian website hosted in france, German website hosted in Austria, …).

I heard somewhere that Google is still working on that issue though.

Anyway, in an ideal world your French website would have a French domain name and be hosted in France.
But for huge organizations that have the same the website duplicated in 10 or 20 different local versions, all hosted in the same country, the benefits would not be worth the cost.

Just buy your country specific TLD, configure each one correctly so that they point to the corresponding localised homepage and your local rankings will be just fine.

PS: You can also check the SEOmoz post about international versions of websites. There are some interesting tips in it.