Author: Vassilia Orfanou, PhD, Post Doc
Headline Diplomat eMagazine
Digital transformation is one of the most decisive and pervasive changes that businesses around the world are facing to stay competitive. A growing number of companies are rethinking processes, products, and services by integrating digital functionality and leveraging large databases.
The digital transformation process began a few decades ago within large companies but has undergone a sharp acceleration in recent years thanks to the fact that resources capable of enabling change (information, digital tools, and resources for storing data) have gone from being scarce and expensive to being abundant and accessible. A pervasive digital transformation is, in fact, based on the availability of a physical and technological infrastructure – the cloud – which can deliver memory and computing power in an economical, secure, and scalable way.
How can we in fact champion a data cloud economy, intended to create and sustain business growth for SMEs, public administrations, and large corporations?
Reflecting on this question, we already know that we have achieved only a fragment of such business growth strictly directed and operated by hyperscalers or in other words, big companies with the necessary resources, skills, stakeholders, and power vibrato to sustain their business growth no matter the challenges in place.
But are these hyperscalers our groundwork of European Power or in other words, is it our only hope moving forward? Before moving any further, it would be worthwhile reading an interesting read by a Parisian legal journal published in 2021 known as Revue européenne du droit. (European Law Review).
One quote comes to mind. Bruno Le Maire, the French Minister for Economy and Finance had initially once pointed out “We are not China. We are not the United States. We are European countries with our own values.”
Indeed, we are not the United States, and in some cases, we have stopped reacting as Europe, while we have lost our connection with the US and China. We are indeed in the cross-roads of succeeding or entirely failing to bring the flow and storage of European data under greater control to the users and giving more control over their own privacy.
But can we really provide an alternative to existing cloud offerings; provide greater control over data, greater interoperability between platforms, greater privacy and promote the development of new services and business models that are crucial for the future of SMEs and public administrations?
The quick answer is that we can, but the architecture itself must be designed in such a way to respond to the main issues of interoperability and security in data management, which constitute an obstacle to cloud adoption but also to support new applications that require distributed clouds at the access network level, as in the case of the 5G network.
What is really needed? A technology standard that will provide for strong interoperability between the different suppliers: an essential element to avoid lock-in situations (impossibility of exit) of customers and suppliers towards the individual cloud computing platforms.
And why is this needed? Simple. If it does not happen, we would simply need to accept that the only way to do so is to continue giving way to individual cloud computing platforms and a centralized approach, which also means by default that only hyperscalers can provide the solution in the first place and only if they want to and when they want to. The next question is why on earth would they want to if it will ruin their business and obviously their targets by each year’s end?
In parallel, the problem that we would concretely need to answer to is one of the broader regulatory frameworks implemented at a European level. Two areas, in particular, raise critical issues that can influence the success of a decentralized approach to cloud computing: competition and taxation. Or at least, these two issues come first to mind.
In the field of competition, the protection of European technology start-ups and SMEs is becoming crucial for developing a vital European ecosystem in the digital sector. OECD reports that Amazon, Apple, Facebook, Google, and Microsoft have made around 400 acquisitions globally over the past decade. Very few of these have been scrutinized by national competition authorities or the European Commission.
However, these acquisitions can result in the loss of competitors or be considered “killer acquisitions” aimed at reducing or eliminating competition by preventing the development of new products and services.
In the area of taxation, a crucial issue is working towards a global, or at least European, solution to the taxation of digital companies. Current international business taxation rules cannot capture those business models that profit from digital services provided in a country without being physically present. Furthermore, the existing taxation does not recognize the new ways of creating profits in the digital world and the role that users play in generating value for digital companies by continuously providing personal data.
So, what comes to mind is where the real opportunity lies to start managing cloud infrastructures in a European way, that does not necessarily make the US or the Chinese way obsolete and can in fact work seamlessly together to create a federated, open, and interoperable infrastructure capable of accelerating the digital transformation of companies and public administrations?
Why is it necessary that Europe creates its cloud data infrastructure?
Cloud services can lower the investment requirements for companies that want to enter the market and enable easier experimentation of new business models for those that are already part of it.
This feature makes cloud computing a tool to support innovation, helping small businesses avoid major capital investments in ICT infrastructures, and thus facilitating the entry into the market of new companies and services.
The cloud is a productive platform, thanks to the supply of software components needed to build more complex and completely new services and, obviously a global market. Cloud computing providers, through their platforms, offer a complete ecosystem of tools, third-party applications, and software and therefore represent the gateway to the market for developers and IT solution providers. So, a cloud data infrastructure is a facilitator for economic growth.
But the problem is that Europe is entering the digital age with a major deficit compared to America and Asia (the United States and China, specifically). Almost all cloud services in Europe are supplied by non-European companies (primarily Amazon, Google, and Microsoft) with the consequent dependence on external suppliers for the enabling infrastructure of the new business and public administration transformation process.
This dependence poses a security problem about data management, the provision of services, including public ones, and in general, the continuity of a company’s business.
Finally, the dominant position of very few global companies generates contractual imbalances, especially towards small and medium-sized enterprises (SMEs), and fuels increasing returns of scale that make it extremely difficult for newcomers to attract customers and offer better prices and services.
However, Europe has one of the most important industrial bases in the world, and current digital platforms are mostly designed for consumer-facing business models that do not meet the technical and security needs required by the industrial sector.
This circumstance opens up an important opportunity for Europe to become a leader in cloud infrastructure supporting these sectors, in fact connecting the different existing cloud ecosystems to make data and databases interact and communicate with each other and make them available to EU citizens, thus allowing the creation of new and diversified business platforms and possibly models that could support further operationalisation.
In fact, to do so, there is no need for yet another could service, a cloud offering, a cloud management initiative or a cloud concept or idea to be in place. The need is for a tangible way to concretely connect different existing cloud ecosystems to make data and databases interact and communicate with each other and then make them available to EU citizens.
In fact, such a tangible would be to build, assemble and use trusted and value-creating data-based cloud services, as well as create new products/services and foster new business models, that are compliant with European regulations and values, and will fully take advantage of the massive European potential in terms of technical expertise and market size. And to do so working with US and Chinese companies would still be necessary and on the basis of fair competition, scaling and acceleration.
For instance, if we think of the finance sector as an example, there are many companies in the financial industry that lack cloud service and a data space they could trust. This has in fact prevented them, alongside insurance companies, and other institutions to have access to data-based services that can provide them with a competitive edge in the global business. So the growth of this industry was and is still being hindered, with a lot of potential remaining untapped.
The European landscape
As a proponent of Europe, but equally a fellow American that has studied equally in the EU and US and has worked in both continents equally, having served from conglomerates to public entities to small and bigger startups – one thing is certain: The European Union is committed to promote digitization and will fiercely pursue policies for digitization and innovation for the development of the Member States.
In parallel, our economy, as we see it every day, increasingly depends on data, which can simplify both the use of existing services and facilitate the development of new economic models and production initiatives, providing them with a significant propellant. Such is their importance that the European Commission, to reap the full benefits of data and the development of this new data-driven economic paradigm, has put in place and is implementing policies that ensure and promote, in the near future, the free movement of non-personal data.
Cloud systems, the Internet of Things and AI, enabling innovation and economic and productive development thanks to emerging data and technologies – 5G and 6G, are simplifying the management and storage of data for European companies and the public sector. These are done securely and in compliance with European rules and standards.
Not to mention that European digital sovereignty will be strengthened by using a European data industry. This will give Europe a political weight and economic strength, facilitating the increase in the competitiveness of EU industrial companies, the digitization of public administrations, promoting their efficiency in providing services to citizens, improving health care, and giving a decisive boost to safeguarding and protecting environmental ecosystems.
So, for sure Europe has to accelerate its efforts given the increasingly rapid progress in this field by the United States, China, Russia, and India, who are potential and real competitors of the EU, with the necessary money, resources, skills to scale 100 times higher than Europe that will continue undisturbed to create directives, theories, how to and what if and practically such elements will never really operationalize on face value.
On a positive note, the political will has already been expressed by all 27 member countries on the “next generation cloud for Europe” and for data processing and services of public administrations, businesses and citizens, the European Commission has followed the Regulation on the free circulation of non-personal data at a close turning point.
The purpose of the Framework Regulation for the free flow of non-personal data in the EU is to ensure:
“Free movement of non-personal data across borders: every organisation should be able to store and process data anywhere in the EU”.
“The availability of data for regulatory control: public authorities will retain access to data, even when it is located in another EU country or when it is stored or processed in the cloud”.
“Easier switching between cloud service providers for professional users. The Commission has started facilitating self-regulation in this area, encouraging providers to develop codes of conduct regarding the conditions under which users can move data between cloud service providers and back into their own IT environments”.
“Full consistency and synergies with the cybersecurity package, and clarification that any security requirements that already apply to businesses storing and processing data will continue to do so when they store or process data across borders in the EU or in the cloud”.
Discussing the benefits of cloud infrastructure to Europe’s competitiveness
The cloud can be described as the combination of three interdependent elements:
- the data infrastructures that store and manage the data
- broadband networks that transmit data
- increasingly powerful and technologically advanced computers used for data processing.
Big Data has a significant impact on the economic-financial trend at a global level and the development of companies on an international level, allowing opportunities for great development and innovation in the industrial and social fields. Perhaps the most emblematic example in these times of global pandemic in which we still find ourselves, could be the change in the approach to scientific research.
So we have to get closer to what is called “open science” (an approach to science that refers to the transformation and openness of science through ICT and which uses information sharing and collaborations facilitated by network technologies).
Thanks to cloud infrastructures, it is possible to transfer, share and reuse data easily by connecting and dialoguing markets and borders, institutions, and research disciplines.
Until recently, due to the European Union’s limited processing capacity of data, these products from an EU research and industry perspective were often processed by non-EU countries, which prompted European researchers and innovators to move towards those countries where it was possible to have high data and computing capacities faster.
The European data strategy
With the European Parliament Resolution of 25 March 2021 on a European Data Strategy (2020/2217 (INI)), the EU Parliament welcomes the Communication from the Commission on the European Data Strategy, believing that the strategy is fundamental for the economic sustainability of European companies and their competitiveness in the global scenario, and the scientific progress of universities, research centers, and artificial intelligence.
This is a strategy that, in the intentions of the Union legislators, will be decisive for the creation of a “data society” that is firmly based on EU rights and values and defines conditions that allow the Union to play a leading role in the data economy, which will then lead to sustainable growth and quality jobs.
According to the official journal from the European parliament resolution, the data strategy “considers that ensuring trust in digital services and safe smart products is fundamental for the digital single market to grow and thrive and should be at the core of both public policy and business models.”
Furthermore, the Parliament urges the Union to conduct an assessment and mapping of existing legislation to assess what adjustments need to be made to foster the development of a data society and economy, to safeguard fair competition and legal clarity for all subjects involved.
But not only that, the parliament resolved that “the processing of personal data, including its transfer, must always comply with the Union data protection acquis, and that any future sectoral or fit-for-purpose legislation needs to respect them.”
Essential to the vision of the Union is to achieve an anthropocentric society and data economy based on the values of the Union, but with respect for privacy, transparency, and respect for fundamental rights and freedoms.
Irrevocably, it is necessary to find a legal framework that allows the least technologically gifted countries to make use of more developed technologies without allowing big techs or smaller ones to access or use personal data. Hence, the necessity of the concrete realization of this is rather immediate.
In the future, the necessary initiatives in place in combination with the national strategies of the main countries, could give the impetus towards the creation of European companies that can manage and control all these processes and can stand up to the giants of multinational tech giants. Meanwhile, striking a balance between then, the national strategies, regulation and what Europe ultimately wants and intends to do is crucial not just for next generation of the digital economy, but our future overall.