"Amazon is just a webshop!" – "Europe needs bigger balls!"

This year I had the honor to host the CEO Couch of the Open-Xchange Summit 2013. This is a format were Top CEOs are confronted with provocative questions on a specific topic and had to answer to the point. Among the guests on the couch were Herrmann-Josef Lamberti (EADS), Dr. Marten Schoenherr (Deutsche Telekom Laboratories), Herbert Bockers (Dimension Data) and Rafael Laguna (Open-Xchange). This year’s main topic was cloud computing and how German and European provider to assert oneself against the alleged overwhelming competition from the US. I’ve picked out two statements mentioned during the CEO Couch, I would like to discuss critically.

Amazon is just a webshop!

One statement has got me worry lines. One the hand VMware already had underlined that it seemingly underestimates its supposed biggest competitors, on the other hand its absolutely wrong. To call Amazon today still a webshop one must close its eyes very wide and hide about 90% of the company. Amazon is today more than just a webshop. Amazon is a technology company respectively provider. Rafael has illustrated this very well during his keynote. There are currently three vendor who have managed to set up their own closed ecosystem of the web services over the content to the devices. These include Google, Apple and Amazon.

Besides the webshop further technology and services belong to the company. Including the Amazon Web Services, content distribution for digital books, music, movies (LoveFilm, Amazon Instant Video), ebook reader Kindle and Kindle Fire (with an own Android version), the search engines, Alexa Internet and the movie database IMDb.

Above that, if you take a look at how Jeff Bezos leads Amazon (e.g. Kindle strategy; sell at cost price; sales over content), he focuses on the long-term growth and market share, rather than to achieve quick profits.

Who wants to get a good impression of Jeff Bezos’ mindset, I recommend the Fireside Chat with Werner Vogels during the 2012 AWS re: Invent. The 40 minutes are worth it.

Europe needs bigger balls!

The couch completely agreed. Although Europe has the potential and the companies to technically and innovative play its role in the cloud – apart from privacy issues, compared to the United States we eat humble pie, or better expressed: “Europe needs bigger balls!”. That depends on the one hand with the capital that investors in the U.S. are willing to invest, on the other hand, to the mentality to take risks, to fail and to think big and long term. At this point, European entrepreneurs and investors in particular can learn from Jeff Bezos. It’s about the long-term success, not about the short term money.

This is in my opinion one of the reasons why we will never see a European company that, for example, is able to hold a candle to the Amazon Web Services (AWS). The potential candidates like T-Systems, Orange and other major ICT providers that have data centers, infrastructure, personnel and necessary knowledge, rather focus on the target customers they have always served – the corporate customers. However, the public cloud and AWS similar services for startups and developers are completely neglected. On one side this is alright since cloud offerings on enterprise level and virtual private or hosted private cloud solutions are required to meet the needs of enterprise customers. On the other hand, nobody should be surprised that AWS currently has the most market share and is seen as an innovation machine. The existing ICT providers are not willing to change their current business or to expand it with new models to address another attractive audiences.

However, as it also my friend Ben Kepes well described, Amazon is currently quite popular and by far the market leader in the cloud. But there is still enough room for other provider in the market who can offer use cases and workloads that Amazon can not serve. Or because the customers simply decide against the use of AWS, since it’s too complicated, too costly or too expensive for them, or is simply inconsistent with legal issues.

So Europe, put on bigger eggs! Sufficient potential exists. Finally, providers such as T-Systems, Greenqloud, UpCloud, Dimension Data, CloudSigma or ProfitBricks have competitive offerings. Marten Schoenherr told me that he and his startup process of developing a Chromebook without Chrome. However, I have a feeling that Rafael and Open-Xchange (OX App Suite) have a finger in the pie.


A view of Europe's own cloud computing market

Europe’s cloud market is dominated by Amazon Web Services, Microsoft Windows Azure, and Rackspace. So the same providers that serve the rest of the world. Each of these global providers has a local presence in Europe and all have made efforts to satisfy European-specific concerns with respect to privacy and data protection. Nevertheless, a growing number of local providers are developing cloud computing offerings in the European market. For GigaOM Research, Paul Miller and I explore in more detail the importance of having these local entrants and asks whether Europe’s growing concern with U.S. dominance in the cloud is a real driver for change. The goal is to discover whether there is a single European cloud market these companies can address or whether there are several different markets.

Key highlights from the report

  • European concern about the dominance of U.S. cloud providers
  • Rationale for developing cloud solutions within Europe
  • The value of transnational cloud infrastructure
  • The value of local or regional cloud infrastructure
  • A representative sample of Europe’s native cloud providers

European cloud providers covered in the report

  • ProfitBricks
  • T-Systems
  • DomainFactory
  • City Cloud
  • Colt
  • CloudSigma
  • GreenQloud

Get the report

To read the full report go to “The state of Europe’s homegrown cloud market“.


Free GigaOM Research analysts webinar on July 9 about the future of cloud computing in Europe

Anyone who is interested in the future of cloud computing in Europe should register for the international GigaOM Pro analysts webinar on July 9. Moderated by Jo Maitland, Jon Collins, George Anadiotis and I will talk about the opportunities and challenges of the cloud in Europe and countries such as Germany or the UK, thus giving an insight into the cloud computing market in Europe.

Background of the webinar

The European Commission unveiled its “pro cloud” strategy a year ago, hoping to reignite the stagnant economy through innovation. The Commissioner proclaimed boldly that the cloud must “happen not to Europe, but with Europe”. And rightly so. A year later, three GigaOM Research analysts from Europe Jo Collins (Inter Orbis), George Anadiotis (Linked Data Orchestration) and Rene Buest (New Age Disruption) – moderated by Jo Maitland (GigaOM Research) – take a look at who the emerging cloud players are in the region and their edge over U.S. providers. We dig into the issues for cloud buyers in Europe and the untapped opportunities for providers. Can Europe build a vibrant cloud computing ecosystem? That’s a tough question today as U.S. cloud providers still dominant the industry.

The free GigaOM Research analyst roundtable webinar “The Future of Cloud in Europe” taking place on Tuesday, July 9, 2013, at 8 a.m. PT.

Questions to be answered

  • What’s driving cloud opportunities and adoption in Europe?
  • What are the inhibitors to adoption of cloud in Europe?
  • Are there trends and opportunities within specific countries (UK, Germany, peripheral EU countries?)
  • Which European providers show promise and why?
  • What are the untapped opportunities for cloud in Europe?
  • Predictions for the future of cloud in Europe.

PRISM plays into German and European cloud computing providers hands

The U.S. government and above all PRISM has done the U.S. cloud computing providers a bad turn. First discussions now kindle if the public cloud market is moribund. Not by a long shot. On the contrary, European and German cloud computing providers play this scandal into the hands and will ensure that the European cloud computing market will grow stronger in the future than predicted. Because the trust in the United States and its vendors, the U.S. government massively destroyed itself and thus have them on its conscience, whereby companies, today, have to look for alternatives.

We’ve all known it

There have always been suspicions and concerns of companies to store their data in a public cloud of a U.S. provider. Here, the Patriot Act was the focus of discussion in the Q&A sessions or panels after presentations or moderations that I have kept. With PRISM the discussion now reached its peak and confirm, unfortunately, those who have always used eavesdropping by the United States and other countries as an argument.

David Lithicum has already thanked the NSA for the murder of the cloud. I argue with a step back and say that the NSA “would be” responsible for the death of U.S. cloud providers. If it comes to, that remains to be seen. Human decisions are not always rational nature.

Notwithstanding the above, the public cloud is not completely death. Even before the announcement of the PRISM scandal, companies had the task to classify their data according to business critical and public. This now needs to be further strengthen, because completely abandon the public cloud would be wrong.

Bye Bye USA! Welcome Europe und Germany

As I wrote above, I see less death of the cloud itself, but much more to come the death of U.S. providers. Hence I include those who have their locations and data centers here in Europe or Germany. Because the trust is so heavily destroyed that all declarations and appeasement end in smoke in no time.

The fact is that U.S. providers and their subsidiary companies are subordinate to the Patriot Act and therefore also the “Foreign Intelligence Surveillance Act (FISA)”, which requires them to provide information about requested information. The provider currently trying to actively strengthen themselves by claiming more responsibility from the U.S. government, to keep at least the rest of trust what is left behind. This is commendable but also necessary. Nevertheless, the discussion about the supposed interfaces, “copy-rooms” or backdoors at the vendors, with which third parties can freely tap the data, left a very bad aftertaste.

This should now encourage more European and German cloud providers. After all, not to be subject to the U.S. influence should played out as an even greater competitive advantage than ever. These include inter alia the location of the data center, the legal framework, the contract, but also the technical security (end-to-end encryption).

Depending on how the U.S. government will react in the next time, it will be exciting to see how U.S. provider will behave on the European market. So far, there are always 100% subsidiaries of the large U.S. companies that are here locally only as an offshoot and are fully subordinated to the mother in the United States.

Even though I do not advocate a pure “Euro-Cloud” neither a “German Cloud”. But, under these current circumstances, there can only be a European solution. Viviane Reding, EU Commissioner for Justice, is now needed to enforce an unconditional privacy regulation for Europe, which European companies strengthens against the U.S. companies from this point in the competition.

The courage of the providers is required

It appears, that there will be no second Amazon, Google, Microsoft or Salesforce from Europe or even Germany. The large ones, especially T-Systems and SAP strengthen their current cloud business and giving companies a real alternative to U.S. providers. Even bright spots of startups are sporadic seen on the horizon. What is missing are inter alia real and good infrastructure-as-a-service (IaaS) offerings of young companies who do not only have infrastructure resources in their portfolio, but rely on services similar to Amazon. The problem with IaaS are the high capital requirements that are necessary for it to ensure massive scalability and more.

Other startups who are offering for example platform-as-a-service (PaaS), in many cases, set in the background on the infrastructure of Amazon – U.S. provider. But here have providers such as T-Systems the duty not to focus exclusively on enterprises and also allow developers to build their ideas and solutions on a cloud infrastructure in Germany and Europe through the “Amazon Way”. There is still a lack of a real(!) German-European alternatives to Amazon Web Services, Google, Microsoft and Salesforce!

How should companies behave now?

Among all these aspects one have to advise companies, to look for a provider that is located in a country that guarantees the required legal conditions for the company itself regarding data protection and information security. And that can currently only be a provider from Europe or Germany. Incidentally, that was even before PRISM. Furthermore, companies themselves have the duty to classify their data and to evaluate mission-critical information at a much higher level of protection than less important and publicly available information.

How it actually looks at U.S. companies is hard to say. After all, 56 percent of the U.S. population find the eavesdropping of telephone calls as acceptable. Europeans, and especially the Germans, will see that from a different angle. In particular, we Germans will not accept a Stasi 2.0, which instead of rely on the spies from the ranks (neighbors, friends, parents, children, etc.), on machines and services.