After close to a century of globalization, we’re all interdependent. This is especially true for the digital economy, which largely depends on American processors like Intel or AMD that are produced in Taiwan and other Asian countries (such as TSMC). Even as interdependence continues, the concept of digital sovereignty remains top of mind. It’s really a question of relative independence — enough independence that each country, individually or the European Union as a whole, is able to pursue its own policies that represent its own values.
Digital sovereignty is a matter of significance for companies throughout Europe and the US. A recent survey we conducted with Vanson Bourne found that 98% of IT decision-makers in France, Germany, the UK and the US either already have sovereignty policies in place to keep their data in specific locations — or have plans to implement them.
Collaborating for the future
FrenchTechBerlin, an organization that brings together members of the French and German tech ecosystem, recently held an event focused on the topic of digital sovereignty — and specifically, what can be done to help support the growth of European cloud providers.
I was honored to be invited to speak at this event, thanks to François Delattre, France’s Ambassador to Germany, and Philippe Huberdeau, secretary general of the Scale-Up Europe initiative. The Scale-Up Europe Initiative was launched in 2021, bringing together a cohort of start-up and scale-up founders, investors, researchers and corporations with a common goal: for the continent to become home to 10 tech giants, each valued at more than $120 billion by 2030.
This engagement was an opportunity to really dig into a topic I am very passionate about. Here are some of my thoughts coming away from the event.
An era of rapid digital transformation
Business processes are being transformed by the 4th industrial revolution in every aspect of the economy and government. Because of this, efficiency of digital infrastructures is key for enterprises and nations to remain competitive. To continue to choose and set its own policies, like GDPR, the EU requires strong technology leaders — and more efficient digital processes for enterprises across industries.
This isn’t just a matter of policies. The value of tomorrow’s jobs is also at stake. The most valued jobs are those that can’t be fully automated; they are the positions that require care, creativity, and flexibility in real-world situations. But there’s the risk that if the global digital economy is solely dominated by non-European enterprises, this will have a negative outcome on European tech jobs.
European cloud providers have lost market share — a decrease from 27% in 2017 to 13% in 2022, according to Synergy Research Group. Almost three-quarters (72%) of the total cloud market share in Europe is held by US-based AWS, Microsoft and Google. These giants aren’t just market leaders; they’re also technical leaders.
Furthermore, because of concerns over security and data sovereignty, EU businesses lag in the adoption of cloud technologies as compared to their American counterparts. This puts them at a disadvantage in terms of digital effectiveness.
It would be foolish to ban the use of leading public cloud solutions by EU businesses and governments. It would result in decreased competitiveness since European enterprises would not be able to leverage the best technical solutions.
It would be equally foolish to do nothing, as this will result in a significant loss of independence.
4 ways to foster the growth and development of European cloud leaders
The EU needs to foster the emergence of strong European cloud infrastructure leaders, plus continue the adoption of cloud technologies by EU business.
The EU could put in place four practical measures:
Foster the adoption of private cloud: When businesses deploy private clouds, they enjoy the same efficiency benefits as with public cloud — and they develop cloud technology expertise. By contrast, when they deploy public cloud, they essentially outsource this know-how to the cloud provider. Furthermore, many mid-size European businesses aren’t moving to the public cloud because of security concerns; moving to a private cloud infrastructure is less frightening.
Establish interoperability standards between clouds: It has always been the strategy of leading firms in the computer industry to lock in customers by preventing interoperability. This strategy is also adopted by leading public cloud providers. The EU will benefit from a world where enterprises can truly deploy a hybrid multi-cloud strategy, choosing cloud infrastructure for each use case. It is critical that the EU fosters the establishment of interoperability standards to enable real competition.
Implement the Buy European Act: IT is an innovation-led industry, which means it can be harder for mid-size businesses to be sustainable. They don’t have the same R&D budgets as larger organizations. If we want European champions to emerge, we need to incentivize EU buyers to seek out European companies over non-European players where possible. This will have a far greater impact than grants or funding. It will help European companies achieve critical mass, invest in R&D, and close any technology gap against their competitors.Continue financing for EU cloud infrastructure scale-ups with international recognition: Relatively few cloud infrastructure scale-ups exist in the EU. Despite significant improvement of scale-up financing in the past 10 years, they’re still substantially underfunded compared to their American counterparts
The road ahead
Despite all the hype, we’re still at the beginning of the cloud transformation journey. From a technical standpoint, there’s no doubt that software-defined distributed infrastructure — consumed through API and with highly automated operations — is far more efficient than prior generations of IT infrastructure. And the public cloud services market continues to expand. According to Gartner, worldwide end-user spending will grow to $591.8 billion in 2023 — a 20.7% increase from 2022.
To stay competitive in this rapidly-growing market, even as emerging new technologies shake things up, EU-based companies must play a leading role in the global digital economy.Read more about my thoughts on this subject in this piece for Silicon France and this one for TechZine.