Cloud Computing With Borders May Be On Horizon in Europe
A proposal to build a national federation of interconnected computing clouds in France, funded in part by government in order to protect the country's sovereignty, data privacy and local jobs, is gaining favor. Some fear that the idea, which is in part a backlash against American companies like Google, will spread to other parts of the Continent, potentially undermining the promised benefits to Europeans of cloud computing.
French tech companies and businesses are calling on local governments in France to partner with private companies to build a network of data centers and shared cloud platforms and services that would respond to the computing needs of French businesses, organizations, governments and citizens, giving them an alternative to handing their data to American companies. The group called for local cloud infrastructure to be built with the help of funds set aside for France's "grand emprunt national," a €4.5 billion economic stimulus package that will start to kick-in at the end of next year.
Cloud computing is the term for a new form of distributed computing which allows consumers, enterprises and governments to store their data and their applications on networked servers rather than on local computers and data centers and to tap into computer applications and other software via the cloud, freeing themselves from building and managing their own technology infrastructure In addition to reducing operational costs, analysts say the shift to cloud technologies allows radical business innovation and new business models.
Some industry experts in Europe believe only giants like Google and Amazon can achieve the necessary economies of scale in building the massive data centers that underpin the cloud. They fear that national projects will be white elephants and question whether big enterprise customers like Danone and Carrefour will be willing to pay the price of French sovereignty. "Interconnection of hybrid clouds is not a simple problem and the risk is that the benefits come slowly and that local champions cannot grow and reach critical mass fast enough," say Pierre Liautaud, a Frenchman who has worked in the tech industry for 25 years, holding executive positions at both IBM and Microsoft and heading up start-ups. He is currently organizing a November conference for the European Tech Tour Association to highlight European start-up companies in cloud computing. Most start-ups in Europe are concentrating on creating applications that run on top of infrastructure built and run by American companies like Google, Amazon and Microsoft.
Trouble is, some say that it will be impossible for European companies to be competitive if they don't control the underlying cloud computing infrastructure and infrastructure software. They argue that Europe can not afford to allow American companies to control a technology that may underpin every consumer, business and government service of the future. "Europe can not stay away from owning its own cloud infrastructure," says Francois Bourdoncle, CEO of Exalead, a Paris-based software provider which is positioning itself as a provider of infrastructure software for the cloud. "It is a critical element of competitiveness, not even considering the sovereignty part of it, to control where your data is hosted, how it is being used and how you access it."
Bourdoncle and others say the industry is at an inflection point. Some liken it the moment in time to when Europe realized that computer chips would be key to the future and needed to have its own global champion. The French and Italian governments set about fusing two national semiconductor companies to create STMicroelectronics, today one of the top ten global chip companies. Now is the time to do the same in cloud computing, they say. At stake is a market that tech consultancy IDC projects will grow from $17.4 billion in 2009 o $44 billion in 2013.
But in order for cloud computing to reach that kind of market size, the industry has to address important issues that are alarming consumers, businesses and governments. Challenges include keeping data and systems secure, maintaining the privacy of people and organizations, avoiding being locked into one cloud provider and creating the right regulatory balance between customer protection and business efficiency, according to a report prepared by Accenture and the World Economic Forum.
There are questions about how much American companies like Google can be trusted to guard data privacy. Earlier this month European privacy regulators reacted angrily to the disclosure by Google that it inadvertently had collected private data from Wifi networks while compiling its StreetView service. Distributing the storage of data is supposed to make it safer but many European companies, particularly those in Germany, are reluctant to allow American companies to transport their data outside of a country's national borders. National data protections laws are further confusing the market, raising questions over whether Europe will have a single market for cloud computing. A May 17 position paper published by The Association for a Digital Economy in France (L'ADEN), a trade organization representing major French technology companies, including Orange Business Services and Bouyges Telecom ,as well as a group representing all of France's chambers of commerce, makes market fragmentation a real possibility.
The French government has already said that will set aside €2.5 billion of the €4.5 billion for digital services, including cloud computing. The French business newspaper Les Echos reported earlier this year that Dassault Systems, Orange Business Services and Thales were lobbying the government to set aside €700 million for cloud computing.
The budget is not yet set in stone but pressure is clearly mounting for the government to step in. Politicians in France have been vocal about issues of national security, the implication being that cloud computing - if controlled by the likes of Google and Amazon- would hurt data privacy and leave companies vulnerable to industrial espionage.
In its May 17 statement L'ADEN gives a list of reasons for the government to back a plan to build a federation of local clouds including:
- Safeguarding national sovereignty: "Notably against big American and Asian players in cloud computing and in order to conserve knowledge and technological competence on French territory as well as protecting data privacy and sensitive industrial information."
- Creating jobs: "Developing locally based IT infrastructure will avoid workers having to relocate outside France and facilitate the development of teleworking."
- Developing secure digital services in areas such as health, education, the legal system and government services.
- Ensuring the development of businesses of all sizes by making the best IT infrastructure available locally to companies throughout all regions in France
- Avoiding the under-utilization of existing French data centers and rendering them obsolete.
Ivan Ferneti, a principal at London-based private equity firm Doughty Hanson Technology Ventures, which has invested in European-based cloud start-ups, expressed skepticism about the French proposal. Managing a sophisticated set of services from a state of the art data center requires deep knowledge and experience in many IT fields, he says. "This is why running cloud data centers works only for the likes of Amazon, Microsoft, Google and a very few others who will get bigger and bigger," he says. " If local government and politicians believe they can create local employment with cloud infrastructure investments they are misled."
European serial entrepreneur Roman Stanek, currently founder and CEO of Good Data, a cloud computing company which provides collaborative analystics on demand, also questions Europe's ability to compete on infrastructure. "There is enough demand for infrastructure-as-a-service, for example, from Amazon.com, but I don't believe that the local European infrastructure will see enough demand, and therefore, scale, to compete," says Stanek, a Czech who previously founded NetBeans, which was sold to Sun Microsystems and Systinet, which was sold to Hewlett-Packard.
Bourdoncle sees it differently. His company, Exalead, is part of the Quaero projet, which is often painted as a misguided French government attempt to build a "Google killer." Bourdoncle bristles at that description. He describes Quaero (Latin for "I Seek" )as a €100 million large scale collaborative research program around multimedia indexing. (Details about the project's progress will be revealed to journalists on May 27 at a Paris press event)
In addition to furthering multimedia search, Exalead owns technologies that can target important areas of cloud computing, such as distributed storage to replace today's relational databases, which do not scale up to the cloud, says Bourdoncle. European companies can and should build infrastructure software because that is where companies can make the most margins and it will bring more choice and competition to the market, he says. "Fragmentation of the market is a good thing because it brings competition," says Bourdoncle. "What is important is that (American companies like Google and Amazon) collaborate to make their infrastructure interoperable with that of others."
Only a few global players are likely to successfully offer cloud computing infrastructure and standardized services in segments like customer relationship management and right now the leaders are American, says David Bradshaw, research manager for European cloud services at technology consultancy IDC. But a large number of players will be able to succeed in niche markets and by creating new kinds of applications for consumers and business, says Bradshaw. Indeed, IDC believes roughly half of all of the projected revenue from cloud computing will come from applications. Providing mobile cloud services is also seen as a big area of opportunity for European companies. Service providers looking to offer cloud services include BT, Telefonica and Orange.
"We could do with a bit more competition in some areas but services created by local vendors need to make commercial sense," says Bradshaw, "Otherwise Europe could end up with enormously costly white elephants."