High stakes threaten EU cloud strategy

European policy makers are in a race against time to flesh out their strategy for encouraging the development and adoption of cloud services in Europe. But with so many different stakeholders to satisfy and so much at stake — almost €1 trillion in estimated economic benefits for example — the risk of failure is high.

The potential prize is the creation of a single market for cloud computing that allows European businesses to participate globally in the digital era. But it could all go off the rails in a matter of months.

Speaking at the EuroCloud Congress in Luxembourg earlier today, Andreas Tegge, vice president of EU government relations at SAP, warned of the risks if the cloud industry fails to produce answers to the policy makers' concerns:

"It can go wrong, creating regulatory burdens that will stifle the development of cloud computing in Europe. We have to get our act together to make sure this goes in the right direction ...

"If we do not get our act together, the Commission will act and impose regulations on us."

How did we get here?

There's a lot more detail that I'll go into in a separate article but from a high-level perspective, there are two main reasons why cloud has got onto the policy agenda in Europe.

The first is that one of the core missions of the EU is to remove barriers to trade between member states within the European Union. Creating a single digital market has been high on the priority list of Neelie Kroes, the European Commissioner for the Digital Agenda. By the beginning of 2010, Commissioner Kroes had realized that cloud computing could play a big role there and she determined to formulate a strategy to help it along.

Secondly, as part of formulating the strategy, the Digital Agenda team commissioned research from IDC that demonstrated that if it got the strategy right, there would be a potential one percent uplift to EU GDP by 2020 — this is how the almost €1 trillion figure I mentioned above is arrived at (actually €940 billion cumulatively in the years 2015-2020). This report arrived on the desk of European Commission chief Jose Manuel Barroso in spring last year, just when he was dealing with the fallout from Greece's economic implosion. He immediately prioritized the cloud strategy as a key objective across the Commission.

The strategy was launched in September last year and as I mentioned I'll dive into more of the details of how it's being executed in a separate article. For now I want to highlight the three pressure points that, if any of them go awry, could turn the whole exercise into a slow-motion car crash not only for the Commission and the European economy but also the global cloud industry.

The clock hands of history

This is all being played out against the drumbeat of a ticking clock because of the five-year life cycle of the European Commission. The incumbent team of 28 commissioners who lead Europe's policy-making will be replaced by a new set of appointees next summer. These incumbents — including Viviane Reding, responsible for data protection and Digital Agenda supremo Neelie Kroes — have less than a year to finalize the legacy of their term in office.

So for example one aspect of the cloud strategy is the drafting of an EU-wide Code of Conduct for cloud computing providers that would aim to be endorsed by all the 28 national data protection authorities in the EU member states. This work is being led by a working group of industry participants who will then submit a draft to the data protection group. If successful, it would mean that there would no longer be any need to separately meet data protection criteria for each individual member state. SAP's Tegge summarized the significance:

"Our customers tell us this would be the breakthrough. We could outsource the due diligence."

But the Code of Conduct has to be in place before the current Commissioners leave office next September, he warned, otherwise the momentum for seeing the initiative through will disappear:

"We need to get this done within the next six months otherwise a huge opportunity will be lost."

National agendas in a global market

The second source of tension is that the EU is a club of autonomous countries, each with their own ideas about how to foster cloud adoption and growth. My diginomica colleague Stuart Lauchlan yesterday presented a typical view from a national perspective:

The notion that national strategies can't work as well just because they haven't been passed through a series of committees in Brussels is a manifestation of a troubling Eurocratic centralist push.

I take a different view. One person's centralization is another person's harmonization.

The problem with each nation pursuing its own separate strategy is that if you perpetuate a European digital market that has got 28 different sets of rules and customs, then cloud entrepreneurs will take their business elsewhere. Anyone with an innovative cloud business model is just going to take it straight to the US market where there's one currency, one language and a single way of doing business instead of 28 different ones.

All of the giants of cloud computing are US companies for a reason. The biggest factor is that you can't reach scale in Europe without tripping over national barriers.

Having said that, the Commission often has an arrogant and heavy-handed manner of achieving harmonization that rubs national agencies up the wrong way. But neither do the British have a track record that allows them to lecture other countries about how to be team players in Europe.

Prehistoric public sector procurement

It is in the public sector where the nation-centric mentality is most entrenched and this is probably going to end up as the key risk area that will fatally undermine the EU cloud strategy.

An example of how this works comes from the response to an idea that's been floated this summer in reaction to the Snowden revelations and the NSA PRISM scandal. The concept is that countries would opt in to a common set of data protection and privacy rules, underpinned by treaty, that would permit the free passage of data within those countries under the shared rules. This wouldn't have to be restricted to Europe if other countries wanted to participate —  indeed the view of cloud industry players is that the more global it could be, the better.

Unfortunately, there is no prospect of this idea succeeding, said SAP's Tegge: "It will not fly I can tell you." The public sector is just starting to get used to the idea of consolidating into national cloud datacenters from the traditional private on-premise model. Their reaction to the idea of putting any of that data outside their own borders was one of incomprehension and disbelief, he revealed:

"Public sector agencies are not ready to implement it yet. They were shocked when we told them to think about it. So it's on hold. Europe's not ready for it."

Even more inimical to the cloud model is the public sector's attitude to IT procurement. One element of the EU cloud strategy is a funded project to encourage standardization of procurement processes for cloud computing across different countries. Unfortunately, this project, which goes under the name of CloudforEurope, has adopted the worst possible model of waterfall project development to pilot this process. Again, I'll go into more detail in a separate article but (and here I must emphasize this is strictly my personal opinion) it will be a miracle if anything useful comes out of it.

This is one area where, if only they were on better talking terms with each other, the Europeans could learn a lot from Britain's G-Cloud initiative. But with CloudforEurope now just a few weeks away from its official launch, it's probably too late to remodel the exercise into something more useful.

Verdict

One of the paradoxes of the cloud strategy is that there's a huge commitment to making it work from both the industry and from the civil servants within the European Commission. But that in itself is no guarantee of success. It may be that the entire premise of the strategy is flawed.

The Commission's thinking, informed by the IDC research that it commissioned, is that cloud adoption is being held back by the market's lack of trust and confidence in the model. Therefore, the argument goes, the model needs more standardization and codification in order to overcome those fears and thus accelerate adoption.

But perhaps it's the market's expectations that ought to change. Instead of bending the cloud to fit the expectations of a market schooled in acquiring conventional computing, maybe what's needed is better education about how to acquire cloud services and resources, and the very different ways in which they operate.

At least the industry and the policy makers are talking to each other. The big stumbling block is that the timetable imposed by the policy makers' terms of office may not correspond to the right time for codification and standardization of an emerging set of technologies and business models.

The armageddon scenario is that the policy makers run out of time or patience, impose misdirected regulation and then blame the industry for the resulting failure of the strategy. Avoiding that outcome will take careful diplomacy and continuing dialog.

Disclosure: SAP is a diginomica premium partner. The author is a vice-president of EuroCloud and organizer of the EuroCloud Congress. The views expressed here are his own as a diginomica writer.

Photo credit: © Yury Zap - Fotolia.com