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Boosting presence of EU-based cloud providers would improve business take-up of cloud services, says EESC

Out-Law News | 22 Jan 2013 | 1:54 pm | 4 min. read

The European Commission must do more to encourage EU-based cloud providers to emerge as effective competitors to providers based in the US, an EU consultative body has said.

The European Economic and Social Committee (EESC) said that businesses and individuals would be more likely to utilise cloud computing (CC) if their "trust" in the technology grew. It said that there is inherently less trust in using non-EU providers of cloud services and encouraged the Commission to take measures, such as enabling the use of "subsidies", to encourage EU-based cloud suppliers to emerge and improve trust levels.

The EESC said that there is currently a "dependency" on non-European companies providing cloud services to EU citizens because some existing EU-based providers lack the "same level of global visibility and influence" as Amazon, Microsoft and Google and are therefore "unable to compete" with those US firms.

"The Committee recommends that the Commission seek to promote the development of European digital energy production, i.e. the emergence and strengthening of European suppliers of CC infrastructure (IaaS: Infrastructure as a Service)," Staffan Nilsson, president of the EESC, said in a new opinion (12-page Word doc) the EESC has published on the cloud computing strategy issued by the Commission last year.

Nilsson said the Commission could encourage telecoms firms or software producers, among others, to become cloud providers and that it could itself provide funds, or encourage the use of state subsidies, in order to "promote the emergence of CC data centres managed and run by European operators".

"Without being as large as the market leaders, European CC operators enjoy several competitive advantages: CC customers are still extremely cautious and prefer a local CC supplier – in the same country or even region if possible – even if this does not allow them to maximise the cost reductions from CC; data protection regulations in Europe and the member states are still complex for users, and favour the use of national CC suppliers; international regulations applicable to suppliers in other countries outside Europe are not currently appropriate for CC; the best known example of this is the US Patriot Act," Nilsson said.

"These favourable conditions for the emergence of European operators will not last, however, and it is therefore important and urgent that the Commission take action to promote the emergence of European operators during this favourable period," he added.

The EESC is a body that consults on EU policy making. Its members include representatives from employers' organisations, trade unions, consumer groups and professional associations. It has "strongly" urged the Commission to change its strategy on cloud computing to account for its own recommendations on the issue.

The Commission was wrong in its strategy to state that localised efforts within the EU to improve cloud take-up would be "unlikely to deliver optimal cost efficiencies", Nilsson said. The EESC encourages the Commission to "promote the emergence of European CC suppliers, be they local, national (sovereign cloud) or cross-border suppliers (consortia across several member states)," he said.

Luke Scanlon, a technology law specialist at Pinsent Masons, the law firm behind Out-Law.com questioned the viability of the EESC's proposal.

"The EESC has not demonstrated that it fully appreciates the business model that has led to Amazon and Google, in particular, being in a position to become cloud infrastructure market leaders," Scanlon said. "These businesses have leveraged their existing IT infrastructure which they have built to provide leading data intensive services to a worldwide audience – Google Search and Amazon's online shopping store, to now provide cloud infrastructure."

"It is probably for this reason that the Commission has said that localised efforts at infrastructure would be unlikely to deliver optimal cost efficiencies and if the EESC opinion is to be acted upon the Committee must first provide evidence and a more detailed strategy as to how the significant capital costs of building cloud infrastructure can be overcome", he added.

In its 'communication' on cloud computing last September the Commission outlined plans to establish new model contract clauses for the use by businesses when contracting with cloud providers, after it expressed concern over the existing power large cloud providers have in setting the terms and conditions for use of the technology. The Commission also set out proposals for the creation of new technical standards for cloud computing, such as those affecting interoperability and data security.

Nilsson said the EESC backed the plans, and described the measures as "specific, realistic and necessary". However, it urged the Commission to do more, such as to actively encourage small and medium-sized businesses to increase their take-up of cloud services by making them "more aware of how they can benefit from ... lower costs, flexibility and responsiveness to IT developments" among other things.

Nilsson also questioned the Commission's claims that increasing the up-take of cloud computing in the EU could lead to 2.5 million new jobs being created. It said that "negative aspects" of "cloudification", such as job losses and offshore outsourcing, had not been mentioned by the Commission in its cloud document.

The Commission was further encouraged by the EESC to itself take a lead in adopting a 'cloud first' policy for the delivery of public services. This could save it money and also lead to increased trust the use of cloud computing, Nilsson said.

"The EESC calls for institutional and secured databases to be integrated in a regulated manner - gradually, but as soon as possible - into the cloud computing (CC) environment," he said. "This would enable citizens to manage critical data more easily (according to European and national law) and, at the same time, to grow trust in CC."

Nilsson also advocated the use of a new online dispute resolution system for resolving disputes that arise between businesses and cloud suppliers based in other countries.

"Since it has to be independent and impartial, this mediation could be entrusted to an existing or new European agency," Nilsson said. "It would be responsible for mediating and negotiating between suppliers and users of CC. In addition, this mediation work would make it possible to identify the main causes of dispute, recurrent problems and needs for adjustments to practices or regulations."