May 14, 2021

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A European sovereign cloud, yes, but under what conditions?

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Several initiatives are flourishing in France or more widely in Europe in favor of a European sovereign cloud, while this juicy market remains dominated by Americans. KPMG analysts, commissioned by InfraNum, Talan, Linkt and OVHcloud, have looked into the issue and are formulating proposals on the subject in a white paper.

The phenomenal growth of the online computing market (“cloud computing”) looks very promising, including in Europe. From 53 billion euros in 2020, it could weigh 260 billion in 2027, or even more than 500 billion in 2030 – which would make it overtake the telecoms market, underlines this document. If nothing is done, Europe could let slip half of the economic impact linked to this phenomenal growth, he warns.

On the Old Continent, the most prominent player, the French OVHcloud, only captures 4% of online server rentals, while Amazon Web Services, Microsoft Azure and Google Cloud control 70% of the market. Worse, the same are carving out the lion’s share of other cloud technologies, from software to online development tools.

350,000 jobs in the cloud

If they manage to turn the dynamics of the market in their favor, OVHcloud, T-Systems, Orange Business Services, Dataiku, Outscale and others could capture 26% of the European market (or 70 billion euros in value) in 2027. Especially , they would lead to the creation of 350,000 jobs while responding to the growing challenges of data protection and sovereignty, says the white paper. But on the same condition, they should be content with 15% of the market for 150,000 new jobs.

KPMG analysts have identified avenues through which European companies in the sector could interfere in order to retain the value created by the sector in Europe. “On the customer side, today it is very difficult, if not impossible, to obtain full satisfaction with the current offer,” underlines Jean-Charles Ferreri, partner at KPMG.

The five scenarios outlined by the audit firm – after 250 interviews with private and public decision-makers, in particular at the European Commission – will undoubtedly delight European cloud players… but tighten up their competitors.

In the first scenario, the market regulates itself against the practices of locking up data – to which the large American suppliers are regularly subject, accused of complicating the transfer of data to rival platforms. “This is the Gaia-X project, already implemented, but it is not necessarily sufficient”, indicates Jean-Charles Ferreri.

Gafa split

So, KPMG imagines different waves of regulation. A second scenario thus provides for the creation of a cloud regulator that could force market players, and in particular dominant companies, to price transparency and interoperability with the competition.

Even harder, analysts imagine requiring non-European players to invest part of their research & development budget in Europe. As in China or Russia, at the same time, it would mean forcing American players to place their European subsidiaries under the control of a local partner via a joint venture …

In a fourth scenario, analysts even plan to force Amazon, Google and Microsoft to separate their cloud activities from their historical activities (e-commerce, advertising, software) through which they finance or make a return on their investments.

More realistic in the short term, a final scenario hopes that European players will be able to seize the opportunities linked to the analysis of industrial data (“edge computing”, artificial intelligence) and to the concerns of sovereignty around this data in order to differentiate themselves. The signage of public purchasing to local players is prohibited.

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