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Business must take to the cloud says Roland Berger.


Munich: Cloud computing opens up new growth prospects for the information and telecoms (ICT) industry in Europe, but businesses and politicians need to act now to harness it.

That's the view of German strategy firm Roland Berger, and it is lobbying with software group SAP AG for a consistent legal framework for cloud services across Europe, to help realize that potential.

Roland Berger and SAP have just completed a study entitled "Survival of the fittest — How Europe can play a leading role in the cloud".

They argue that cloud computing, (technology that lets people save and process data, not on their own IT infrastructure, but virtually, on the Internet) means far-reaching changes for the ICT industry. Cloud computing promises users and providers significant cost reductions and new sales potential. The cloud economy's worldwide sales volume is expected to grow to around USD 73 billion by 2015. European ICT providers can clearly benefit from this growth if they start their own operations and European politicians create the right conditions for this.

  • Cloud computing offers users lower costs, more flexibility, and opens up new growth markets for providers
  • Worldwide cloud computing sales are set to triple to nearly USD 73 billion by 2015
  • New boost expected for jobs market in Europe: the cloud economy could generate at least 70,000 new jobs a year
  • The EU, local authorities and ICT suppliers need to act to profit from these growth opportunities
  • Roland Berger and SAP present a five-point program
  • One of the key points of this program is creating a cloud gold standard based on a consistent legal framework for cloud services in Europe

In 2010, around USD 21.5 billion was invested in cloud computing and related services, Roland Berger calculates. By 2015 that figure is expected to more than triple — to around USD 73 billion. That makes cloud computing the fastest-growing segment in the ICT business. "Cloud computing is mushrooming, especially among professional users, which offers outstanding growth prospects especially for European providers," says Carsten Rossbach, Partner at Roland Berger. "This could also give the European jobs market a lasting boost if the products on offer and background conditions are right." According to the study, the cloud economy will create at least 70,000 new jobs across Europe a year.

A new financial ecosystem

As data processing moves to the "cloud" en masse, this will create a new business ecosystem in the coming years. "Cloud computing represents a real revolution, for small and medium-sized enterprises above all," says Peter Lorenz, Head of On-Demand Solutions at SAP. "This is because it will give these businesses access to IT architectures that only major companies could afford up until now. This means new market opportunities for IT providers offering their customers customized solutions and flexible services."

The cloud services market offers a range of service models. "Infrastructure as a Service" (IaaS) customers can access external providers' computer and memory resources dynamically as they need them. And customer use of external providers' software applications is already established on the market (Software as a Service, or "SaaS"). "Platform as a Service" (PaaS) providers, on the other hand, provide development and run-time environments on which businesses and their partners can write and run their own applications. "The 'Infrastructure as a Service' segment is now highly mature and is populated largely by US ICT providers," explains Rossbach. "Such infrastructure services offer only low profit margins in the medium term, however."

"Software as a Service" and "Platform as a Service" offer more potential, as Peter Lorenz of SAP explains: "These two aspects of the cloud economy are set to grow more strongly and offer higher profit margins in the coming years. And this is where Europe has the chance to be involved." These platforms provide a hotbed for strong ecosystems with many ICT platforms, so they can be expected to boost the economy as a whole.

Consistent guidelines are needed — the five-step program

If European ICT providers are to succeed in the booming cloud market, however, politicians and business must work closely together to create the conditions for the cloud economy to keep on growing. "One thing users are complaining of in particular at present is that there are no consistent technical, legal or financial standards for cloud computing," Rossbach explains. "That includes data protection, for instance, for which there are still no pan-European standards. But European data protection must not stir up a fear of bureaucracy, but must become a seal of quality for 'Made in Europe'."

So Roland Berger Strategy Consultants and SAP propose a five-point program to realize the benefits of the cloud economy.

1. Create a European legal framework to harmonize data protection and security across Europe.

2. "European Cloud Gold Standard": European industry should create a European seal of quality for cloud services to increase acceptance of cloud applications.

3. Innovation in the cloud: the European Union and member states should put more into supporting cloud-centered public sector research and development programs.

4. Cloud computing for SMEs: Software should be promoted specifically for SMEs to use cloud computing. This does not require any additional resources, as the European Union has already provided enough funds in the current program period.

5. Public sector as pioneers: The public sector is a major purchaser of IT solutions in Europe, so it should set the trend toward the cloud economy. If all authorities used these services more, that would help them penetrate the market considerably and create confidence in the seal of quality.

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