In the beginning, US public cloud players didn’t care much about Germany. However, in the meantime more and more providers are bustling on the German market. Above all, Frankfurt emerged as the Mecca of cloud data centers.
The top 5 reasons of Germany’s attractiveness are:
- a stable political situation.
- a central location in Europe.
- high data privacy laws.
- a geographical stable situation.
- a high economic performance (fourth largest national economy in the world and number one in Europe).
Frankfurt is the Cloud Hub in Germany
Data centers are experiencing their heyday. The “logistic centers of the future” are coming to the fore as never before and provide the digital backbone of the digital transformation. With good reason. In the course of the last decade more and more data and applications have been moved to IT infrastructure of global distributed data centers. The significance of data centers as well as IT infrastructure as a logistic data vehicle is no accident. Also German companies have recognized this. More than two-thirds (68 percent) see data centers as the most important building block of their digital transformation.
In the recent 20 years a cluster of infrastructure providers has been established in Frankfurt that helps companies of the digital economy to position their products and services in the market. These providers have shaped Frankfurt and its economy and deliver integration services for IT and networks as well as data center services. More and more public cloud providers have recognized that they have to be on site in the local markets and thus near their customers – despite the inherently global character of a public cloud infrastructure. This is an important insight. No provider who wants to make serious business in Germany can relinquish a local data center location.
The research paper “The significance of Frankfurt as a location for Cloud Connectivity” is dealing with the question, why Frankfurt is the preferred location for cloud data centers.
Public Cloud Providers and their Data Centers in Germany
A view on the most important public cloud providers for the German and European market shows that already half of them has decided for Frankfurt as their preferred data center location. That a German data center pays off is proved by Amazon Web Services (AWS). According to the German country manager Martin Geier, the cloud region in Frankfurt (consisting of two data centers), AWS has opened in October 2014, is the fastest growing international AWS region ever. In addition, the AWS region has helped to quicken the German cloud market. On the one hand, AWS customers are welcoming the opportunity to physically store their data in their own country. On the other hand, AWS efforts also help local providers like ProfitBricks who indirectly profit from constantly getting new customers.
- Despite being a vigorous follower of Amazon Web Services, Microsoft has yet not managed to open a datacenter in Germany. This is hard to explain, considering that Microsoft has had its own legal entity in the German market for a long time and should be well familiar with the concerns and requirements of the German enterprise customer. Microsoft’s efforts in the cloud are considerable and display a clear trajectory. Certainly, Microsoft would be able to finally convince its German customers and meet their requirements only through establishing a local datacenter. Rumors are spreading that Microsoft will open one in Q2 2016. One possible strategy could be to partner up with a large local partner, similar to the joint efforts of Salesforce and T-Systems. At the moment, Microsoft relies on technology partnerships (Cloud OS Partner Networks) with local managed service providers, who build their own Azure-based cloud environments based on the Azure Pack.
- At CeBIT, VMware announced officially the General Availability (GA) of its German datacenter. The outlook for the technology provider is generally good. On the one hand, a large part of on-premise infrastructure is already virtualized via VMware technologies. On the other hand, businesses are searching for ways to migrate their existing workloads (applications, systems) to the cloud without facing too much hassle and making many modifications. Indeed, even when VMware’s own public cloud offering focuses on standardized workloads, it still competes directly with a range of its partners (cloud hosting providers, managed service providers), who have built their offerings using VMware technologies as a foundation.
- The American provider Digital Ocean has had its own datacenter in Germany since April 2015. Digital Ocean is a niche provider to keep a close watch on. It targets mostly developers and not so much enterprise customers. Moreover, if Digital Ocean seriously wants to stand in the ring against Amazon Web Services, then the company must offer more than boring SSD cloud servers and a couple of applications to its customers.
- Rackspace is not yet represented by a local datacenter in the German market; yet its business is expanding into the DACH market, where Germany is of strategic importance. A local datacenter would certainly underline the commitment. Rackspace could have winning cards as a managed cloud service provider, because the majority of German businesses are already busy with managed cloud services.
- On account of the partnership with T-Systems, Salesforce will likely establish a seat in Frankfurt. The datacenter’s opening is announced for August 2015.
- At present, one should not expect Google to open a datacenter in Germany. This speaks for Google’s attitude to determine the rules of the game and concentrate on itself, rather than on the needs, challenges and concerns of its customers. This is reflected widely through the Google Cloud Platform. The requirements of the corporate customers have to this date not been considered by Google.
Moreover, it is worth noting that the lower costs and the innovation capabilities of public cloud providers put a continuously rising pressure on managed service providers with own datacenters. The providers are now forced to change their strategies and become managed service providers who operate infrastructure for public cloud environments. This means that the providers manage their customers’ applications and systems from cloud infrastructure such as that of Amazon’s AWS. Only specific, mission-critical workloads remain in the providers’ own datacenters.
Frankfurt’s leads in density of datacenters and interconnected Internet exchange points not only in Germany but also Europe-wide. The continuous motion of data and applications on the infrastructure of external providers has made Frankfurt the citadel of cloud computing in Europe. Strategic investments from colocation providers such as Equinix and Interxion have emphasized the significance of the location.
As most of the relevant public cloud providers have already found their own place in Frankfurt, Crisp Research envisions an important trend for the next couple of years – an increasing number of international providers will build their public cloud platforms in Frankfurt and will respectively continue to expand and develop them there.