Can one company dominate the public cloud Infrastructure-as-a-Service (IaaS) market in Europe as Amazon has in the US?
The short answer is no. The longer answer is that Europe — for many reasons — is a much more fragmented (perhaps fractious) market than the US — or North America for that matter. Here’s why it would be hard for one infrastructure player — even Amazon — to dominate the European Cloud.
Data protection sitch remains fuzzy
If the European Commission is able to unify the varied data protection mandates across the 27 European (EU) countries as promised, public cloud adoption would probably speed up. Many companies are just deferring cloud decisions — or adopting private cloud that would let them keep their data local — because they don’t know how these laws would affect them now or in the future.
The EC cloud computing report, issued last week, does recommend that the various governments come up with a comprehensive plan on data protection, the goal being a “single set of rules at the EU level and a one-stop shop for enforcement.”
But, no actual convergence of those laws is expected till 2014 or 2015. In the mean time a technology advisor with the UK’s Information Commissioner’s Office (ICO) last week reiterated that companies remain accountable for handling customer data regardless of where it’s deployed. In a statement, Simon Rice said:
“As a business, you are responsible for keeping your data safe. You can outsource some of the processing of that data, as happens with cloud computing, but how that data is used and protected remains your responsibility.
It would be naïve for an organisation to take the attitude that these guidelines are too much effort to simply store some data in a different place. Where personal information is involved, the stakes are high and the ICO has already demonstrated it will act firmly against those who don’t meet data protection laws”
The perception is that if businesses outsource their data to a “certified” cloud provider (more on that in a second), they will be exempt from penalties if there is a breech. Rice seemed anxious to remind companies that the buck will still stop with them. (ZDnet and SCMagazine.UK have good roundups on this data protection dustup.)
The EU report also recommended that cloud providers be “certified” as trustworthy to handle consumer data. That prompted blowback from Liam Maxwell, the UK’s deputy CIO. He slammed the EC’s certification plan because it will restrict the number of cloud providers.
Maxwell called this a “tremendously retrograde step” that would “enable the oligopoly that has driven IT for many years to police the cloud,” according to itpro.co.uk.
Beyond data protection, Europe is still Europe
Even if data protection laws get totally sorted out, Europe remains fragmented by language, by currency (only 17 of the 27 European Union countries are in the Eurozone) and by culture. The relative homogeneity of the US was a factor that let Amazon get so big so fast, European IT pros said.
Amazon runs its European cloud operations out of Dublin and support for Amazon Web Services is available only in English (and Japanese) although a spokeswoman pointed out that the AWS site itself is available in German, Spanish, French, Japanese, Portuguese and Korean. In addition, Amazon takes payment only in U.S. dollars.
While many Europeans speak English, that’s not a foregone conclusion. And it just seems polite for a company doing business in a region to take the local currency.
Tech culture differences
Steve Hughes, principal cloud evangelist for Colt Technology Services, a global IT provider based in London, said three factors contributed to Amazon’s success stateside.
First, Amazon was an Internet-only company that was able to exploit its scale in a one market (e-commerce) to another (public cloud infrastructure). Second, the US has a large developer and early adopter market that flocked to Amazon’s easy-to-spin-up compute instances. And third, Amazon faced tech competitors that were more concerned with protecting existing revenue streams than jumping into the cloud. It is still riding that first-to-market advantage.
“That combination of factors coming together at the same time doesn’t really exist in Europe,” Hughes said.
Still some in the market expect that a few key IaaS players will emerge over time. “There will probably be consolidation because of sheer economics,” said Carl Theobald, CEO of Avangate, an Amsterdam-based provider of e-commerce payment and transactional services. There will be a few big players that provide a higher level of service at scale — there won’t be hundreds but there won’t be just one, he said.
Nationalism is not dead
There’s also a healthy dose of protectionism both in local governments and the national telcos that could work against an outside power like Amazon encroaching on their turf. Both Deutsche Telekom and France Telecom have lobbied for national clouds, for example, arguing that European countries need to protect citizens’ data from subpoenas or seizure under the 9/11-inspired U.S. Patriot Act. If customer information resides in a data center run by a US cloud provider like Amazon, Microsoft or Google, the thinking is that those companies would have to turn it over to US authorities.
Some European cloud and hosting vendors actually advertise their non-compliance with the U.S. Patriot Act.
Given all these forces at work, it will be hard for any one player to achieve Amazon-like cloud status in Europe. Still, after all this several sources I talked to said if any company could beat the odds, it would be — you guessed it — Amazon itself.
The traction cloud computing gets in Europe and the hurdles to its adoption will be discussed at GigaOM’s Structure: Europe later this month.