While current developments in the cloud industry have market regulators increasingly concerned about antitrust issues with the two big providers, governments might also be well advised to look at the situation from an international security perspective.
At present, economic issues
At the moment, concerns about market dominance and questions about which laws are applicable for cloud providers are dominating the discussions. For instance, as the market share of the two largest cloud providers (Microsoft & AWS) reaches 70% in places, the concern is whether those companies could be using their market share to stifle competition. In a Swiss scenario, a large concern is whether US laws (CLOUD Act) might force Swiss banks to further loosen their secrecy commitments and thus undermine one of their strongest business arguments. Still, these issues are limited to legal questions, whether antitrust or international law.
In the future, a strategic problem?
However, there is another aspect to this concentration of market power. Currently the number one to three (Google) of the cloud market all reside in the United States. So could the fact that almost all major European businesses and a large number of government agencies have – for all practical purposes irrevocably – moved large parts of their IT into US-controlled clouds become a major political liability?
A political worst-case scenario
So far, and certainly under the Biden government, the US has been viewed by all European governments as either a formal ally, or at least a friendly country and a partner in upholding international law, European security and free trade. However, it is by no means clear that this will remain so in the future.
As the 2024 elections begin to loom large on the Horizon of US politics, indicators are suggesting that there is a distinct possibility that the next US government might actually be a radical republican one (Trump or any of his followers) . In this case, US interest could quickly start to diverge from European ones, in the security space, the economic space or even the question of international conduct.
Today it seems far-fetched to think that a US government could use European dependence on AWS, Azure or Google to exert political or economic pressure, both because it would violate US law and international law, and be very bad politics. But Trump has already proved that any laws do not overly concern him when his interests (or even his fancies) are at stake, and other republicans have not been averse to resort to hitherto unthinkable tactics in selecting a new House Speaker, paralyzing the entire lawmaking apparatus in the process. What would they be capable of when in power on both ends of Pennsylvania Avenue?
Strategic Alternatives
Sound risk management needs to look at even very unlikely scenarios if they carry catastrophic risks, and in this extreme scenario European businesses and governments could indeed be susceptible to pressure because of their dependency to AWS, Azure or Google.
- It is doubtful whether their international locations could work entirely independently from the US headquarters even if they wanted to.
- Models like the Oracle „EU Sovereign Cloud“ or Amazon’s AWS European Sovereign Cloud might be the answer to regulatory and data protection challenges, but – even though they are technically not connected to a US data center – they are ultimately still under the control of a US company.
- Short of a wholesale takeover of data centers by European governments European ownership and control of the data could not be guaranteed.
- The only other nation to offer hyperscaler cloud services on a reasonable scale – China – is no real alternative, for obvious reasons.
Towards a European cloud
The recently initiated GAIA-X project claims to aim at digital sovereignty and is a step in the right direction. However, on its website it is expressly defined that „our outcome will not be a cloud„.
Thus, it could be worthwhile to look at launching a dedicated European alternative in hyperscale services to address strategic scenarios beyond data privacy or market share. Unfortunately, things that happen in the US out of economic dynamism usually need a bureaucratic government base to get started in Europe. Still, as there are many success stories like Airbus, CERN or Galileo, it certainly can be done.
With the world in an increasingly unstable state, now is the time for a European cloud!