EU approves €1.2 billion to boost local cloud

Aims to develop alternative to Big Three providers

The European Commission has greenlit a cloud computing initiative, allocating up to €1.2 billion in state aid to propel the European Union into a leading position in the digital landscape.

The project, known as IPCEI Next Generation Cloud Infrastructure and Services (IPCEI CIS), has received backing from seven EU member states: Germany, France, Italy, Hungary, Poland, Spain and the Netherlands.

The European Commission anticipates that the investment will both foster innovation and strengthen the involvement of European businesses in the cloud computing sector, which US tech firms like Amazon, Microsoft and Google have dominated for decades.

As Computing has written before, it's a case of "too many eggs in too few cloud baskets."

Private and public support

Under the IPCEI CIS project, participating countries will contribute up to €1.2 billion in public funding.

This financial support is expected to unlock an additional €1.4 billion in private investments, signalling a commitment to the local development of cloud infrastructure and services.

The project is estimated to generate around 1,000 jobs initially, with a potential to expand to 5,000 in the future. These jobs will primarily cater to data scientists and AI specialists, addressing the growing demand for skilled professionals in these fields.

EU Commissioner Didier Reynders noted that, if the project is successful and generates additional revenue, participating companies will be required to return a portion of the aid, ensuring accountability and a fair return on public investment.

Nineteen companies are taking part in the project, including Atos and Orange from France; Deutsche Telekom and SAP from Germany; and Telefonica Espana and Telecom Italia.

The project's first tangible results are expected by the end of 2027.

Aiming to be a "major player"

The European Commission's IPCEIs, which aim to integrate research, finance and business, are strategic initiatives designed to spur economic growth, enhance competitiveness and facilitate the EU's green and digital transitions.

Since 2018, the Commission has approved six IPCEIs in areas including microelectronics, batteries, hydrogen and communication technologies.

The EU is now aiming to position itself as a major player in the global cloud and edge computing landscape, competing with the Big Three US firms. At present, AWS, Microsoft and Google command a 72% cloud market share in Europe, and also dominate the UK.

The UK's Competition and Markets Authority (CMA) launched a formal investigation into their dominance on the 5th October, citing the need for effective competition in the cloud services market.

Last month Amazon accused Microsoft of engaging in business practices that stifle competition, in a letter dated 23rd November. The CMA made the letter public this week.

The letter underscores Amazon's concerns about Microsoft's licensing agreements. It claims these practices make it difficult for customers to switch cloud providers or use competing services alongside Microsoft's Azure.

Amazon's accusations echo similar criticisms Google made in October.

Google claimed that Microsoft's licensing practices leave customers with "no financially viable choice" but to opt for Azure, even if they prefer the pricing, quality, security and features offered by competing cloud service providers.