Europe won’t let US dominate cloud

Bloomberg: European governments, determined not to lose another technology battle to the US, are giving domestic companies a leg-up in the cloud.

France set up a venture in November with companies including France Telecom SA and Thales SA to offer on-demand rental of hardware, software and applications that are “made in France.” The German government is working on stricter data-protection rules that would include as a criterion the location of servers that host often confidential and sensitive user data.

State intervention has picked up since Microsoft said last June that, as an American company, it must hand data to US authorities under the Patriot Act if asked, even if its files are stored in Europe. At stake is a market valued at $47 billion in western Europe alone by 2015, according to Gartner. France Telecom, Deutsche Telekom AG and Atos Origin are bidding against US suppliers Hewlett-Packard and IBM.

“It’s the beginning of a fight between two giants,” Jean- Francois Audenard, Paris-based France Telecom’s cloud-security adviser, said in an interview. “It’s extremely important to have the governments of Europe take care of this issue because if all the data of enterprises were going to be under the control of the US, it’s not really good for the future of the European people.”

Europe’s technology companies have fallen behind Google, Facebook and Apple in Internet search, social- media and consumer electronics. Henning Kagermann, a former chief executive officer of Walldorf, Germany-based SAP AG, the largest maker of management-business software, said Europe needs to avoid the same fate in cloud computing.

“I can’t imagine that Europe can afford to leave this field to the US,” Kagermann, now president of Germany’s National Academy of Science and Engineering, said in an interview in Berlin. “This year will show whether we’re serious about this.”

In Europe, Deutsche Telekom’s T-Systems unit and France Telecom are wooing clients with the vow to protect their data from the US government. They cite legal provisions, including the Patriot Act, that allow authorities to request data without a court order and to force providers to keep quiet about it toward their customers.

The European Commission will this month present tighter data-protection rules to shield individuals from data loss on the web while at the same time create a “level playing field for companies” by smoothing out differences across European countries. EU Justice Commissioner Viviane Reding said last month that the reforms should inspire the US to also strengthen its privacy regime.

Some governments have proposed measures that may be seen as protectionist. In September, Dutch Security and Justice Minister Ivo Opstelten told the parliament that US companies will be excluded from bidding for IT services by his government because of fears that the US Patriot Act may allow data to be compromised.

As more European clients may request to have data stored locally, US cloud providers may increasingly have to divvy up contracts with local providers.

Royal Dutch Shell, Europe’s largest oil company and one of Microsoft’s biggest clients in the region, last year decided to store its data in Germany with T-Systems while leaving Microsoft to run software applications. Jonathan French, a Shell spokesman, won’t discuss why the company chose German servers.

This month, Google won its biggest enterprise contract to date, helping 110,000 employees at Spain’s Banco Bilbao Vizcaya Argentaria SA access its Apps suite, which includes e-mail, calendar, data and website creation tools.

That deal doesn’t include storing “more confidential” data about clients and the bank’s business as the lender prefers keeping such files under its own control, said Carmen Lopez, director for BBVA’s Innovation Observatory.

Sebastien Marotte, a vice president at Google Enterprise, said that the company would need “strong justification” from. authorities, such as alleged criminal activity, before handing over data.

In the longer term, European companies won’t be able to win global clients with business models based on local regulations, said Gartner analyst Frank Ridder.

“You always have to keep in mind that you’re participating in a model that’s geared toward global application,” he said. “Governments need to understand that if they want to promote cloud computing they have to open up rather than dig in.”

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