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Survival of the fittest – how Europe can assume a leading role in the cloud

Survival of the fittest – how Europe can assume a leading role in the cloud

December 1, 2011 by Sven Denecken

See below link to a study we recently published – my colleague Bernd Welz and Roland Berger Strategy consultants as authors.

“It is not the strongest of the species that survives, nor the most intelligent. It is the one that is the most adaptable to change.” Charles Darwin (1809-1882)


Diagram showing three main types of cloud comp...

Image via Wikipedia

Executive summary

The market for information and communication technology (ICT) is experiencing a far-reaching transition. On the demand side, cloud services present a tremendous opportunity to reduce fixed costs and add flexibility that sharpens the user’s competitive edge. On the supply side, they open up new potential for growth. To realize this potential and exploit these opportunities, however, incumbent ICT companies are going to have to alter their business models. This study examines the most important drivers and characteristic attributes of the emerging cloud economy. It shows how structural transition harbors opportunities for Europe in particular – provided that industry and governments recognize the potential and take decisive action.


We outline four success factors that can help European ICT providers to attain a leading position in the cloud economy. We encourage them to see the big market picture (understanding the cloud as an ecosystem). We also map out strategic trajectories for large corporations (benefiting from networks as “centers of gravity”) and both small and medium-sized enterprises (SMEs) in the cloud economy (leveraging the potential of “biodiversity”). Lastly, our requirements profile for an innovative industry policy spells out what governments and the corporate sector must do to create a premium environment for the cloud economy.


We recommend creating a common EU legal framework for cloud services, supporting a European gold standard for cloud computing, promoting cloud research, supporting the uptake of cloud computing by SMEs, to position the public sector as a pioneering user and maintaining the momentum of progress.


Objectives and methodology


This study is intended as a contribution to the debate surrounding market development in the cloud economy. Our concern is to highlight promising strategies and areas of potential that ICT companies in Europe can tap in the future. Our insights and hypotheses are based on interviews with experts on the subject of economic effects and industry trends, and on analysis of numerous recent publications. SAP’s experience of the market for cloud-based services was also channeled into the study, as were insights gained by Roland Berger Strategy Consultants in the course of consulting projects in the ICT industry.


cloud computing 
represents a paradigm 
shift in the way 
applications are 
developed, sold, 
deployed, maintained 
and consumed.







(roles of SaaS providers)



The cloud economy – What potential does it offer to Europe

The cloud economy  is expected to deliver  significant stimulus to  europe’s labor market  across the entire  spectrum of industries. Cloud computing is regarded as one of the most important ICT trends in recent years. In the B2C market, there are already signs that the disruptive nature of innovative cloud offerings will have a massive impact on the entire industry landscape.

europe’s firms must

develop innovative,

market-oriented cloud

services for the premium




Read complete study here…


Summary and recommendations

European ICT companies should press ahead with their activities to drive the evolution of cloud ecosystems. They have the chance to adopt a leading role as platform operators or service providers in the cloud economy. Governments must stimulate growth by clearly spelling out the rules of the game and pursuing a focused industry policy. TheEuropean Commission itself should pioneer developments by harmonizing rules and initiating an EU industrial policy for cloud computing. We welcome the initiative of EU Commissioner Kroes to prepare a comprehensive EU Cloud Computing Strategy. Furthermore we submit the following recommendations:


1.  create a common eU legal framework for cloud services

The EU can take legislative and regulatory action by harmonizing the rules that govern data protection and data

security. It can also promote a digital internal market to make it easier for cloud services to be marketed across borders.


2.  support a european gold standard for cloud computing

A European gold standard for cloud computing should be driven by the industry. The EU and national government agencies can support the emergence and acceptance of this kind of standard by

>  harmonizing the demands of public authorities throughout Europe and defining them in relation to the gold standard

>  ensuring that national data protection and data security authorities recognize the standard

>  referring to the standard in legal documents

>  factoring the standard into the award of public work contracts


3.  Promote cloud research

The cloud economy is a critical area of innovation right now. It is important to deliver central backing that translates into broad-based implementation. The EU and its member states should give cloud computing high priority in public R&D programs. The focus should be on how cloud ecosystems and corresponding centers of gravity can be cultivated in Europe. Issues such as interoperability, scalability and data security can serve as the initial point of departure.


4. support the uptake of cloud computing by smes

Cloud computing can be especially beneficial for SMEs. They are the heart of the European economy. An effective

usage of the cloud would drive innovation and competiveness in Europe overall. However, uptake by SMEs in Europe is rather slow due to a lack of skills and awareness, hesitation to adapt business models to the cloud or security concerns. We recommend to create a dedicated EU-wide program to foster the uptake of cloud computing by SMEs. Measures could include tax incentives, training seminars and an EU portal for the exchange of best practices.


5.  Position the public sector as a pioneering user

The public sector is the biggest buyer of IT products and services in Europe. If all public organizations were to use

cloud services, market penetration would increase substantially. The EU and national governments should encourage the public sector to become early adopters of cloud computing. Possible ways to do this include developing a set of cloud procurement guidelines, offering financial incentives for innovative cloud projects, setting up a European platform for best-practice sharing and include cloud services into budget planning.


6.  maintain the momentum of progress

An EU-wide cloud initiative needs a concept whose objectives are broken down into milestones and clearly defined areas of responsibility. A made-to-measure monitoring system should oversee implementation of actions. When the parties involved see measurable progress, this will encourage them to stay committed to a Europe-wide cloud program. The strategic importance of building a leading cloud industry thus places obligations on governments and industry alike. The two sides must work hand in hand to realize growth effects at both macroeconomic and corporate level, both inside and outside the ICT industry




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