Cloud Beyond the Borders – Part 2: Europe | Gaining Altitude in the Cloud

Posted On February 6, 2012

In Part 1 of this blog series, we talked about cloud computing drivers and challenges in Asia. This time Europe is our beyond the borders cloud viewing destination.

Europe does not face many of the hindrances to cloud adoption that developing countries do. European power supplies are reliable, it has excellent data connectivity to the world, and the rule of law prevails. But regulatory issues remain.

Even though Europe is a common market, its 27 member states do not have a regulatory regime that provides a coherent EU-wide backdrop for cloud computing. The example I used in my blog on cloud computing in Asia that cited Indonesian’s data in Singapore or China applies just as well to German’s data in French and British data centers. Service providers, including Microsoft, HP, IBM, and Google, are joined by customers in leading an increasingly loud call for enactment of a coherent regulatory regime. Neelie Kroes, Vice President of the European Commission responsible for the Digital Agenda for Europe, has made this a priority for her office. Still, according to Per Dahlberg, CEO of the Asia Cloud Computing Association, Europe, in general, is about 18 months behind the United States in enterprise cloud adoption, putting it squarely between the United States and Asia.

In an interesting twist, European cloud providers are realizing that strong data protection laws may provide a competitive advantage over established U.S. players. In June 2011, Microsoft announced that, as a U.S.-based company, the Patriot Act requires it to release data to the U.S. government, upon request, without regard to where in the world Microsoft has stored that data. Soon after, several companies in North America and Europe, including defense contractor BAE Systems, Royal Dutch Shell, and the provincial health insurance system of British Columbia, announced they would cancel contracts with U.S.-based cloud services providers. Royal Dutch Shell moved its cloud data storage from Microsoft to a German firm, T-Systems. As T-Systems’ CEO  Reinhard Clemens told reporters, “The Americans say that no matter what happens, I’ll release the data to the government if I’m forced to do so, from anywhere in the world. That’s why we’re well-positioned if we can say we’re a European provider in a European legal sphere and no American can get to them.”

Despite Europe’s competitive advantages in data protection, a final hindrance seems to be European companies themselves. Informa’s Telecom Cloud Monitor reported that, in 2011, Europe accounted for only seven percent of global investment in the cloud. European firms tend to be much more risk-averse than American or Asian ones, and so far seem to prefer using the IT infrastructure they already have. But as existing systems are retired, and as the EU develops a regulatory framework, there is every reason to expect European firms will join those in the United States and Asia in the cloud.

With its first-rate infrastructure and world-class data protection laws, Europe is poised to be a major participant in the global IT cloud. As European firms realize the competitive advantage of stronger privacy standards in their home countries, American and Asian firms would be wise to learn what standards the market comes to expect.

Conclusion

While North America is projected to maintain a 50 percent share of cloud investment in the next several years, rapidly rising interest and capability will fuel investment in Europe – and Asia. These are driven by a variety of factors including broadband penetration, increased mobility, and the need to be globally competitive. But as physical infrastructure develops to meet cloud requirements, cloud uptake everywhere will begin to increasingly hinge on regulatory environments. Specifically, it will require a well-understood framework that defines jurisdiction and data protection. As these questions are settled, companies will soar in the cloud.

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