Bright or Cloudy?
By launching Gaia-X, Germany and France are pushing for a “European cloud.” As presently set up, however, it won’t lead to a hyperscaler able to take on US and Chinese rivals. Rather, it aims at safeguarding Europe’s innovative edge by setting rules and standards—and by protecting data.
At a much-awaited launching event in early June, held together with his French counterpart Bruno Le Maire, German Economy Minister Peter Altmaier lavished superlatives on the cloud computing and data infrastructure project “Gaia-X”: According to Altmaier, it is nothing less than “perhaps the most important digital aspiration of Europe in a generation”—a “moonshot” even.
Indeed, Gaia-X is intended to be a silver bullet. Altmaier wants to tackle the fact that Europe is badly behind the United States and China in terms of cloud services and data availability, be it for nation states, companies, or citizens. Thus, Europe’s striving for “digital sovereignty” is motivated by the fear of losing out in terms of innovation capabilities amid growing market dependencies and data privacy concerns.
A Brief Ride Through the Clouds
Simply put, cloud computing provides IT services—such as procession power, data storage or specific applications—over a network of servers, operating independently of location and devices while being accessible via the internet. But not all cloud services are equal. Roughly speaking, three different delivery models of cloud computing can be distinguished.
When cloud providers deliver access to basic data storage or other computing resources, we talk about “Infrastructure as a Service” (IaaS). Clients buying IaaS services access storage and servers via a “virtual data center” in the cloud, and not through a costly and labor-intensive on-premise IT infrastructure. Due to its “pay-as-you-go” business model, it is highly flexible and scalable as needed. Using “Platform as a Service” (PaaS), clients can additionally access tools to develop and host user-defined applications on a cloud-based platform. And then there is “Software as a Service” (SaaS), where consumers use ready-to-use applications and software on the cloud. Managed by a third-party vendor and hosted on a remote cloud network, the SaaS approach is the most frequently utilized cloud business model.
Companies have different options when accessing cloud-based computing capabilities, including exclusive organization-based “private clouds” that promise a higher degree of control and security over firm-owned data and “public clouds” run by an external cloud services providers. These can be combined in different ways: for example, a “hybrid cloud,” that outsources non-critical information to a public cloud while protecting a firm’s critical data on a private one, or “multi clouds,” which use multiple public cloud providers in order to benefit from the individual advantages of each provider.
And then there is “Edge Computing.” Instead of moving data to a central cloud, this brings computation and date storage closer to the device or data source, thus away from distant data centers towards the edge of the network. This leads to faster data processing and low-latency levels, important requirements for innovation such as autonomous driving, smart cities, or smart industries—they all rely on the almost real-time availability of data and processing power. In sum, cloud and edge computing offer services lay the foundation of the digital economy, driving innovation and economic competitiveness.
Europe as an Also-Ran
Given this importance, the cloud market is highly competitive and has rapidly grown lately; total revenue was $96 billion in 2019, over twice as much as in 2017. With over two thirds of the market share, Amazon Web Services is leading the cloud computing market (including PaaS and IaaS models as well as hosted private cloud services), followed by Microsoft Azure, and Google Cloud. When looking at the SaaS cloud market, which is the largest market segment of the three cloud models, US providers are again in the global lead: As of 2019, Microsoft had a market share of 17 percent, followed by Salesforce with 12 percent and Adobe with 10 percent. Notably, Germany-based SAP is one of the top five providers in the SaaS market—one of the very few notable European players in the global cloud computing market. Meanwhile, Chinese tech giants are trying to break the strong US dominance. Alibaba and Tencent recently announced that they were each investing billions of dollars over the next couple of years in cloud infrastructure. However, US providers have traditionally a strong presence in Europe, while Chinese firms are less represented.
The strong dependency on cloud services of American tech companies also raises legal and data privacy concerns. In that context, the US Cloud Act is a contentious issue since it theoretically compels US companies to grant US agencies access to critical information. The problem: this might even apply when data servers are located outside of the US. Therefore, the law possibly opens the door for US agencies to access data of European companies and citizens. Particularly from a European perspective, where regulation explicitly protects and strengthens the integrity of an individual by giving them power over their data under the General Data Protection Regulation (GDPR), the Cloud Act has been subject to heavy criticism and has ignited a debate among legal experts
Gaia-X: The Silver Bullet?
How does Gaia-X fit into this universe of data and clouds? The prestigious Franco-German project is attempting to tackle the mentioned predicaments by aiming at reducing overall external dependency, protecting data to European standards, and promoting innovation. However, strictly speaking, it skips the extreme difficulty of creating a new, competitive European hyperscaler. Instead, it envisages connecting different existing providers to establish a central, federated data infrastructure system. This ecosystem is supposed to be open to all interested cloud providers, as long as they accept the technical requirements of Gaia-X and the specific architecture reflecting European data privacy standards.
Gaia-X will be steered by a Belgian non-profit organization which has been founded by 22 German and French companies, including SAP, Deutsche Telekom, Orange, and Atos. The first prototype of Gaia-X should be ready by the end of the year. According to Gaia-X’s technical architecture unveiled in June 2020, it will encompass the three cloud computing models IaaS, PaaS, and SaaS as well as Edge Services. Furthermore, with various providers operating in one standardized infrastructure, Gaia-X is supposed to allow for individualized strategies of companies for multi-cloud approaches.
Decreasing dependency on US providers is a core aspect of Gaia-X by facilitating control over data. Firms are supposed to have a choice on handling and storing with the help of clear set standards and regulations—an idea also embraced by the recently issued EU Data Strategy. Although Gaia-X mainly functions as an alternative to already existing providers, non-European market participants can also join, when they adhere to the strict data privacy standards of Gaia-X. Furthermore, Europe’s future competitiveness is among the objectives of the project. With the possibility of accessing large data pools, framed by an open source approach and coherent standards, a significant amount of data should become accessible feeding smart machines or Artificial Intelligence (AI) systems.
Scarce Funds, Complex Implementation
But before Gaia-X can turn into a success, the initiative has to deal with huge obstacles: The enormous investments Chinese and US hyperscalers have made in cloud infrastructure run into billions of dollars on a yearly basis; in contrast, Gaia-X private and public investments will only amount to a two-digit millions figure, according to current plans—a comparatively small amount for a project of such complexity. Moreover, the technical implementation is highly complex, raising the question of whether Gaia-X—the enthusiasm of its French and German founding members notwithstanding—can convince on operability, cost, and applicability. If not, Gaia-X will have a rough ride growing into a pan-European project.
However, Gaia-X may still show the way. Its concept indicates that “digital sovereignty” is not defined as having “mastery and ownership”—a term used by European Commission President Ursula von der Leyen—over key technologies and operating its own hyperscalers in this particular context. Moreover, the “European Cloud” intends to achieve this overarching goal by setting clear rules and standards and protecting its own values. The journey to the moon may still end up in a crash landing; but at present it looks like the best shot Europe has at safeguarding its technological competitiveness.