12 June 2012

European Cloud Computing Strategy – What do businesses need to know?

European Cloud Computing Strategy – What do businesses need to know? - Before the end of summer the European Commission is expected to deliver a comprehensive strategy on how Europe can fully realise the benefits of cloud computing services.
Before the end of summer the European Commission is expected to deliver a comprehensive strategy on how Europe can fully realise the benefits of cloud computing services. The strategy is likely to contain a mix of legislative and non-legislative proposals which will determine the regulatory environment in which cloud services will be rolled-out.

The proposals will be of strategic interest to cloud computing service providers and users globally who are keen to ensure that future European policies promote the deployment of cloud computing effectively and allow businesses to make full use of these new solutions.

Why is a European cloud strategy needed now?

The benefits of using cloud services are increasingly being recognised by policy makers. Benefits extend beyond cost-savings and business facilitation measures; for instance, the use of cloud may help us reduce our environmental footprint and strengthen our digital economy. A recent figure estimates that the European cloud computing market is growing 20% every year. According to IDC analysts, by 2015 the European cloud services will be worth €15 billion.

In order for cloud computing to reach its full potential in Europe several legal, technical, and commercial obstacles must be overcome. Failing to address them adequately risks Europe being left behind by other nations who are rapidly adopting cloud-enabled solutions and business models. The future development of the Internet of things largely depends on the viability of a cloud computing infrastructure which will allow third parties to access and manage millions of interconnected devices.

Based on the input of different stakeholders via previous consultations, the forthcoming strategy will represent Europe’s first attempt to overcome various hurdles. In the words of Digital Agenda Commissioner Neelie Kroes, the strategy will be a road-map for making Europe not only ‘cloud friendly’, but also ‘cloud active’.

Main issues to address

We expect the strategy to propose a number of solutions for tackling a mix of legal, technical and market issues. The main ones are:
  • Data privacy: How do EU data protection rules apply to cloud services? How can consumers exert their right to be forgotten and other privacy rights in the cloud space? Who shall be accountable for the protection of personal data? These are crucial questions which will affect its future take-up.  The issue of data protection is currently being considered in a separate discussion which was launched earlier this year. The final outcome of this discussion will by and large set the legal framework in which cloud technology is able to operate in Europe and beyond.
  • Security: Is the data that I store in the cloud secure? Which national rules apply if European data is stored in a non-EU cloud? What about sensitive data? These issues will be of particular importance to non-EU cloud providers and their EU users. Only last December a UK defence firm dropped its plans to use Microsoft cloud services after the provider was unable to guarantee that stored data would not leave the European Union. Similar concerns have been raised by public authorities reluctant to employ non-EU cloud services for this reason.
What precautions a cloud provider should take to protect the data it stores against online security threats may also be a focus of the European strategy.
  • Interoperability / standardisation issues: The forthcoming strategy is likely to put forward initiatives looking to boost the standardisation of cloud services to support interoperability and portability of data.
  • Ensuring cloud services are (and remain) accessible to all is vital for facilitating the mass take-up of this technology as a day-to-day tool. The standardisation of technology and interoperability of cloud services are also important for encouraging market competition – a measure which stimulates innovation and can drive down costs for customers.
  • Public procurement: Involving public authorities has been identified as a key objective for growing cloud services in Europe. Its widespread adoption within the public sector will drive awareness, trust and confidence in cloud services. Policy-makers will look to harness the collective buying power of these authorities through more harmonisation and integration. In addition, cloud services will be a key enabler for e-government in the EU.
  • Fast broadband connection: The possibility to fully develop cloud computing services depends from the availability of fast and ultra-fast, fixed and mobile Internet connections. Achieving the roll-out of high speed internet across Europe is therefore a key requirement for the future success of the cloud computing sector. Policy initiatives in this area have long been underway. Yet it would be surprising if the strategy does not seek to push these efforts even further and more rapidly.
  • Regulatory regime: It will be interesting to see which regulatory approach policy makers select for promoting cloud services in Europe. Digital Agenda Commissioner Kroes has traditionally favoured the use of self-regulation measures to bring order to the digital space. However future cloud computing operations in Europe will be largely defined by the data protection discussions currently led by Justice Commissioner Reding. Commissioner Kroes’ hands-off approach may therefore be difficult to realise in practice.
  • Business impact

    Europe’s intention to become more active on cloud computing will be seen as both a blessing and a potential curse. Initiatives to increase European cloud use will certainly be welcomed by service providers. A strong and clear legal framework will be a key part in helping build trust in this service, as will bringing legal and regulatory certainly to a new emerging sector. Harmonised legislation at European level will also be crucial in ensuring flawless cross-border data exchange within Europe and beyond.

    Ill-conceived legislation on the other hand will cause more harm than good. Clumsy and burdensome compliance laws could drive up the costs of offering services to cloud customers. If Europe fails to propose a credible and effective approach, national security concerns and protectionist trends might prevail, and companies might be confronted with fragmented national markets and a mushrooming of inconsistent regulatory requirements.

    Next steps

    The European Could Computing strategy is expected to be presented in either June or July 2012. Before its final adoption, different Commission Directorates will have an opportunity to review and amend the text. We expect the Directorates responsible for justice, home affairs, internal market and enterprise policy, to be particularly vocal during this period. In some cases the opinions of these departments will take into account the concerns of certain industry and consumer groups. As we saw in the recent data protection proposal, last-minute changes to key provisions are not unheard of. 

    After its official publication, the European Parliament and the Council of the European Union will present their position on the strategy.

    We should not be surprised if we see those Member States with their own cloud technology providers take a particularly defensive position in a bid to protect their national champions. Already we have seen some national governments trying to impose cloud boundaries which appear to favour national providers. For providers and users alike this represents an unwelcome development as it stands to fragment the European market and drive up the overall costs of the cloud service whilst at the same time diminish its cross-border utility. 

    The time to act is now! A comprehensive public affairs campaign built upon strong ‘bottom-line’ messages delivered at opportune points in the adoption cycle will go a long way towards ensuring that a future European cloud computing framework is propor­tionate and workable for business providers and users.

    For more insight and commentary on cloud computing and related digital issues please visit our Digital Brussels blog.