San Francisco, Dusseldorf The global cloud business is growing faster than ever. Last year, the providers invested around 180 billion dollars in the expansion of their infrastructure, the analysis house Synergy Research Group calculated. Chief analyst and research director John Dinsdale told Handelsblatt. “The market is growing rapidly.”
The global offer is mainly dominated by three US corporations: Amazon, Microsoft and Google. “Microsoft and Google invest between $5 billion and $10 billion each quarter, and Amazon between $10 billion and $22 billion each quarter,” Dinsdale said.
It’s a big market. More and more companies are pushing to move their business processes to the cloud. According to estimates by Steve Mullaney, head of cloud specialist Aviatrix, companies have only moved ten percent of their data to the cloud. That will change dramatically in the next two to three years: by then it should be up to 80 percent of the data. “It’s going to be a massive boom,” said the manager.
A race has broken out. Economies of scale play a major role. The larger a provider, the more powerful the infrastructure and the lower the costs. In terms of global market share, Amazon is firmly in the lead and has been able to claim around a third of the world market for years.
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But Microsoft is catching up fast. While the market share was still 13 percent at the beginning of 2018, the group was even able to claim 21 percent of global cloud sales in the fourth quarter of 2021. During the same period, Google increased its market share from six to ten percent.
The Chinese provider Alibaba increased its market share from four to six percent in the same period. However, the growth is based almost exclusively on the home market of China.
SAP and Telekom lost even in Europe
German corporations do not even appear among the leading companies. Even in Europe, they only play a niche role. Synergy identifies the Dax companies SAP and Deutsche Telekom as the two largest European cloud providers. However, they each only control around two percent of the market. Here, too, the dominant players are Amazon, Microsoft and Google.
Cloud is also not just cloud. The range of services is large: storage space and computing capacity, word processing and financial management, the management of apps and algorithms for speech recognition – users and companies can get all of this from the data cloud.
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In order to be able to use the respective advantages of a cloud solution and not become dependent, companies rely on so-called multi-cloud solutions. So you work with multiple providers like Amazon Web Services (AWS), Microsoft Azure or others.
In the opinion of Aviatrix boss Mullaney, Microsoft should have the edge in the race with Azure. Unlike Amazon or Google, the group is well acquainted with the needs of corporate customers and has been in the business for decades. “However, Amazon is a fast learner and Google has a lot of money,” Mullaney said.
Telekom manager: “We have demoted ourselves to middlemen for offers from US companies”
With software from the cloud, experts speak of “Software as a Service” (SaaS), German providers have successfully occupied some areas. This includes SAP in particular, but also the process mining specialist Celonis.
When it comes to infrastructure from the cloud, however, US companies are far ahead. Deutsche Telekom had tried for a number of years to promote its own offering. Deutsche Telekom board member Adel Al-Saleh even proclaimed “cloud first” as the main strategy last year.
However, the Bonn-based group is primarily promoting partnerships with Amazon and Microsoft. A Telekom manager told the Handelsblatt: “We’re running the cloud business on the back burner, and we’ve demoted ourselves to middlemen for offers from US companies.”
The Telekom Board of Management has proclaimed “Cloud first” as the guiding strategy.
(Photo: Getty Images)
Meanwhile, the major US providers are expanding their focus to Europe and Germany. Google has announced investments of one billion euros between 2021 and 2030 in Germany, primarily in cloud infrastructure. Amazon has also expanded its offerings and will soon be offering data transmission with particularly low delays in Berlin and Munich, which is particularly important for industrial applications. Amazon had initially only rolled out these offers in the USA.
The US cloud providers in Europe are actually facing a major problem: in many cases there is no legal basis for the services. The background is a ruling by the European Court of Justice (ECJ) on the data protection agreement “Privacy Shield” from July 2020. At that time, the ECJ had canceled the legal basis for the transfer of personal data of European citizens to the USA due to insufficient data protection, because US secret services there had extensive access to the data have saved data.
SAP builds cloud for administration – Telekom seeks proximity to Google
Many US cloud services thus violate the European General Data Protection Regulation (GDPR). Fines of up to 20 million euros are possible against companies that use the services.
Ironically, Deutsche Telekom helps US companies to offer solutions in Germany that do not contradict data protection regulations. The group initially relied on a close partnership with Microsoft, which the US group discontinued in 2020. Telekom is now relying on a joint cloud offer with Google, which is scheduled to start in mid-2022. “Our common strategic goal is to support the digitization of European companies and the public sector in the shift to the cloud,” announced CEO Al-Saleh.
SAP wants to start a cloud platform for German administration together with the German provider Arvato Systems – but based on Microsoft Azure. “Through this unique cooperation, the federal government and authorities can fully exploit the potential of cloud solutions,” said SAP boss Christian Klein.
The cloud race is still open. Ultimately, however, there should not be one winner, but several. Because many companies, in order not to become too dependent, do not rely on just one cloud service, but plan directly with several providers.
More: Bitkom President warns: The lack of a data protection agreement with the USA “will massively damage the German economy”