The Draghi Report presents a comprehensive and incisive examination of European competitiveness at a critical time. However, in CISPE’s opinion, the report underplays, and in areas overlooks, the essential role that cloud will in delivering the productivity, innovation and growth that Europe needs.
The Cloud sector is not ‘lost’
CISPE does not endorse the characterisation that the European cloud market is already ‘lost’. European cloud infrastructure providers continue to catalyse innovation and delivery of cloud services that will underpin growth and global competitiveness of European businesses across all sectors.
As Draghi notes, cloud adoption rates are still low, and with the massive majority of SME’s still to leverage the benefits of cloud, there are many opportunities for European providers to deliver services tailored directly to specific customers. Large-scale, global players will be part of the market, but we should not accept a narrow hegemony. European providers have a critical role to play.
Specifically, European cloud infrastructure providers are even now creating federated service structures and marketplaces the provide customers with choice and flexibility to combine the solutions they want and need from specialist, national and global players.
CISPE has always championed a fair and competitive market in which these European players can win customers on a level playing field. Our recent settlement with Microsoft over unfair software licensing was a significant step towards this.
EU-wide Cloud First Public Procurement Policy
Draghi recommends that “the EU should legislate mandatory standards for public sector procurement, thereby levelling the playing field for EU companies against larger non-EU players.” CISPE suggests going further by mandating a Cloud First Public Procurement Policy at a European, Member State and local administration level. The combined purchasing power of public institutions across Europe, when focused on accelerating cloud adoption would not only provide significant opportunities for smaller European cloud providers to compete with specialise and ‘sovereign’ solutions but would galvanise cloud adoption overall. Europe’s cloud market is growing too slowly and falling further behind the US and other regions. Cloud first public sector procurement can jump-start adoption.
CISPE has advocated cloud first public procurement since its inception. The CISPE Public Cloud Procurement Handbook, first published in 2019 and updated in 2022, provides a template, already endorsed by the Commission and several member states. Mandatory application of this or similar models would significantly enhance access to major cloud implementations for European Cloud providers.
Regulation is crushing the competitiveness of European SMEs
The regulatory load on cloud service providers is already high with significant duplication and overlap. GDPR, DMA, DSA and the Data Act, plus energy efficiency and sustainability reporting requirements, and expected AI regulation, weight heavily on cloud service providers. It is the smaller European players for whom this burden is heaviest. Whilst global players have significant financial and human resources to mitigate the impact of regulation and compliance, our members report diverting as much as ten percent of their revenues to coping with their regulatory burden. This is unsustainable and represents a significant drag on their ability to compete, grow and invest in future innovation.
Urgent simplification, harmonisation and consideration of detrimental impact of regulation on growth, innovation and productivity across the bloc is essential.
CISPE has led the way in helping its members, and the wider sector, manage regulatory compliance. The CISPE Code of Conduct for GDPR and a Cloud Switching Framework, as well as the Climate Neutral Data Centre Pact (co-founded by CISPE) represent actionable approaches that facilitate better regulation and minimise unintended damage to European competitiveness.
Data Sovereignty must support choice not lock-in
CISPE’s view is that data sovereignty must support choice and flexibility, not lock-ins and protectionism. The cloud is not a one-size-fits-all solution and both hyperscale and EU native cloud operators have a role to play.
Draghi’s comments seem to support this view: “[it is] important that EU companies maintain a foothold in areas where technological sovereignty is required,” and “[adopting] EU-wide data security policies for collaboration between EU and non-EU cloud providers, allowing access to US hyperscalers’ latest cloud technologies while preserving encryption, security and ring-fenced services for trusted EU providers.”
Ultimately, CISPE believes that working collaboratively will bolster the security and sovereignty of cloud services and Europe’s competitive advantage in the global digital economy.
Europe’s Cloud Service Providers, not Telcos, hold the key to Draghi’s aims
The cloud is the essential platform for the efficient, productive and innovative digital economy that Europe needs to reinvigorate growth and competition on the world stage. CISPE is concerned by the implication in Draghi’s report that it is the inability of the established telcos to invest in network infrastructure that is holding Europe back. CISPE rejects any notion that the established telcos are the only hope for European tech leadership.
CISPE sees no justification for a tax on cloud users to fund network roll-outs. Doing so would jeopardise the very engines of growth that Draghi admits are critical to European productivity, innovation and tech leadership.
Equally concerning is the idea that we should surrender the cloud to the massive global cloud providers because it is too hard and expensive to catch up to them. Over-reliance on a narrow set of options will see sectors tending towards brittle monocultures.
CISPE believes in a vibrant cloud ecosystem that embraces and encourages collaboration, interoperability and flexibility. All players, from incumbent telcos and global-scale cloud providers to SMEs, local and functional specialist cloud operators, have a vital role to play.