The Internet Economy Foundation (IE.F) examines the benefits of moving enterprises to the cloud, identifies key hindrances to more adoption in Germany and Europe, makes recommendations for boosting demand as well as improving the European cloudscape.
Despite much progress and positive developments, Europe's digital economy still lags far behind those of the US and China. An important aspect is that every company in the marketplace faces challenges from new digital business models, or new companies leveraging digital tools to achieve leaps in efficiency or productivity. So everyone, from startups to century-old market champions, must rise to this challenge.
In its 20th published study, together with Roland Berger, the IE.F finds that Germany still has much room for improvement. Using Eurostat’s Digital Intensity Index, which measures how companies use digital technologies, Germany’s digital intensity (25% of all companies) is slightly above the European average. However, it falls far short of the European leaders like Sweden (47%), Finland (46%) or Denmark (43%).
But not all German companies are the same. Interestingly, Germany’s largest companies (more than 250 employees) compare quite well, with a digital intensity score of 60%. It is the small to medium enterprises (10 to 49 employees) that show a huge gap, with an index score of only 20%.
The IE.F study explains why cloud computing is the essential element that can help companies achieve digitalization, for instance via permanent access to new technologies, higher levels of security, scalability and flexibility. There are two important challenges with cloud computing: cost control and lock-in effects, but companies can handle both if they manage their providers well.
The study also uncovers the key hindrances for adoption of cloud computing among SMEs. Perhaps unsurprisingly, fears of security as well as legal uncertainty top the list of reasons, with loss of proprietary company data a primary concern. Another challenge is the regulatory environment. The market-leading cloud providers are US companies, which raises fears of data compromise among European companies about the US CLOUD Act as well as GDPR compliance.
To speed up Germany and Europe’s move to cloud computing, the IE.F recommends boosting demand with 3 measures:
1.Promoting the digitalization of SMEs
- Improving employees’ digital skills
- Expanding cloud usage in public administrations
Likewise, at the European level, measures can be taken to improve the European cloudscape:
- Advance - and improve - the Data Act
- Create legal certainty with a new data agreement
- Further develop the European Cloud Infrastructure
- Introduce a European Seal of Data Sovereignty
The new IE.F report is available online and for downloading as a PDF here
Dr. Friedbert Pflüger, Chairman of the Internet Economy Foundation: "Since its foundation, the IE.F has been committed to the digital future of Europe. Our new Cloud Study shows that great progress has been made in the adoption of Cloud Computing, especially among large companies. However, Germany and France lag far behind the European leaders in the digitalization of their SMEs, and with it, their economies. And the market for cloud infrastructure & platform as a services is already dominated by US hyperscalers, meaning our economies are becoming less sovereign every day due to critical technological dependencies. We urgently need a coordinated and coherent European policy at EU and federal levels that encourages cloud adoption, allays security and legal fears, promotes more competition and fosters the growth and competitiveness of European cloud providers.”