Deutsche Telekom, with Microsoft’s help, is throwing down the gauntlet in cloud computing to U.S. technology rivals Google and Amazon.
“We want to become market leader in cloud businesses in Germany and in Europe in the long term,” said Reinhard Clemens, head of Deutsche Telekom T-Systems unit, which is responsible for the former state-run telephone firm’s cloud computing services. “And we can offer more than the competition.”
Deutsche Telekom, which dominates Germany’s phone and Internet market, owes its new-found confidence in cloud computing to a new partnership with Microsoft.
On Wednesday Satya Nadella, the Microsoft chief executive, came to Berlin to announce a significant cloud-computing cooperation deal with Telekom. The two companies plan to open data centers in Germany to offer cloud storage to European companies that want their data kept locally and off-limits to surveillance by the U.S. National Security Agency.
The European cloud services will be sold in the second half of 2016 to customers in the 28 countries of the European Union and to those in Switzerland, Iceland, Norway and Liechtenstein, Microsoft said. The new cloud system will be run by Deutsche Telekom, which is still 31.8 percent owned by the German government and its main holding bank, Kreditanstalt für Wiederaufbau, or KfW.
The Americans won’t have access to the data, Deutsche Telekom and Microsoft asserted. That will ensure that “customer data remains in Germany,” said Mr. Nadella.
Cloud computing involves the remote storage of digital data at vast computing centers, typically located in the United States, where the new business was developed and established. European privacy law forbids the data of E.U. citizens from being processed by governments and companies without their express permission. Most European consumers who opt for popular online services, such as Facebook or Google services, are often required to sign away those tighter E.U. privacy rights in order to use the services.
While cloud computing has become an accepted business model in the states – 2014 revenues were estimated to be about $100 billion (€93 billion), according to research firm Gartner – data security concerns have stunted its growth in Europe amid revelations of widespread NSA spying in Germany and elsewhere.
European businesses, in particular, have been wary of transitioning their IT archives to a cloud format, experts say, for fear of losing sensitive data to U.S. competitors. To try to buck this trend, Deutsche Telekom and Microsoft are teaming up to offer essentially “local” cloud services to German and other European business customers – promising them that their remote computing hubs and data centers will be immune to U.S. surveillance.
Amazon, the global leader in cloud-based services to businesses, has recognized the trend.
“Companies want to have their data in Germany,” Andy Jassy, who heads Amazon’s web services business, told Handelsblatt, adding that Amazon planned to expand in Germany.
The global market for cloud solutions is estimated to reach $300 billion by 2018. In Germany, 44 percent of companies already use cloud services, according to a recent survey. And that percentage is increasing.
The reason is simple.
“The cloud is a key component of digitization,” said Wolfgang Bock, a partner at Boston Consulting. The economic benefits of cloud computing are immediate: Companies don’t have to pay for costly hardware – or software – in their offices and subsidiaries but can simply subscribe their entire staff to a remote cloud-computing environment. Major business trends of the future such as self-driving cars will be steered via cloud platforms.