A Ger­man cloud for Ger­man com­pa­nies

▶ Stress­ing Ger­man­ness to re­as­sure clients about se­cu­rity ▶ “If a cus­tomer wants data never to leave Bavaria, then it won’t”

Bloomberg Businessweek (North America) - - Focus On/The Cloud - -Sheenagh Matthews, with Ste­fan Ni­cola, Aaron Ri­cadela, and Alex Webb

When auto parts sup­plier Robert Bosch be­gan of­fer­ing data stor­age and soft­ware ser­vices to in­dus­trial cus­tomers this year, it re­al­ized that, in ad­di­tion to its knowl­edge of ma­chines and pro­duc­tion, it had an­other ad­van­tage over tech gi­ants such as Mi­crosoft and Google: its na­tion­al­ity. “We made a con­scious de­ci­sion to lo­cate the Bosch cloud in Ger­many,” says Ste­fan Ass­mann, head of its Con­nected In­dus­try pro­gram. “It gives us a com­pet­i­tive edge. Many com­pa­nies and con­sumers have se­cu­rity con­cerns.”

As Ger­man man­agers be­gin to un­der­stand the im­por­tance of cloud ser­vices, the likes of Bosch, en­gi­neer­ing ti­tan Siemens, cloud-in­fra­struc­ture provider Profit­bricks, and Deutsche Telekom’s T-sys­tems unit are find­ing that Europe’s strict data-se­cu­rity and pri­vacy laws pro­vide a ma­jor r sell­ing point. On its web­site, Profit­bricks Bricks touts what it calls “100 per­centent Ger­man data pro­tec­tion,” un­der­neath the black, red, and gold old col­ors of the Ger­man flag. “Hav­ing Hav­ing a Ger­man cloud helps tremen­dously,”ndously,” says Markus Schaf­frin, an IT T se­cu­rity expert at Eco, a lob­by­ing g group for In­ter­net com­pa­nies. “Ger­many er­many has some of the most strin­gent ent data-pro­tec­tion laws, and cloud-ser­vice providers with do­mes­tic es­tic data cen­ters are of course high­light­ing that.”

The com­pa­nies known as

the Mit­tel­stand—the small and mid­size en­ter­prises that form the back­bone of the Ger­man econ­omy—are rapidly em­brac­ing the idea of the net­worked fac­tory. Yet they re­main wary of en­trust­ing in­tel­lec­tual prop­erty to a cloud con­trolled by global tech­nol­ogy be­he­moths and pos­si­bly sub­ject to gov­ern­ment snoop­ing. “Small and medium en­ter­prises are afraid that those monsters we some­times call In­ter­net com­pa­nies will suck out the brain of in­no­va­tion,” says Joe Kaeser, chief ex­ec­u­tive of­fi­cer of Siemens, which in March be­gan of­fer­ing cloud ser­vices us­ing a net­work man­aged by Ger­man soft­ware pow­er­house SAP.

In a case be­ing closely watched in Ger­many, the U.S. Department of Jus­tice has de­manded that Mi­crosoft hand over e-mails stored on a data server in Ire­land. The soft­ware maker ar­gues that the U.S. has no ju­ris­dic­tion there; the U.S. gov­ern­ment says it does, be­cause Mi­crosoft is an Amer­i­can com­pany. Con­cern that the same thing could hap­pen in Ger­many means lo­cal cloud providers will be able to charge a pre­mium “un­til Mi­crosoft and other Amer­i­cans can con­vince peo­ple they’re safe in these coun­tries,” says Bloomberg In­tel­li­gence an­a­lyst Anurag Rana.

U.S. com­pa­nies aren’t ced­ing the mar­ket. Mi­crosoft will of­fer its Azure public cloud in­fra­struc­ture in Ger­man data cen­ters, with T-sys­tems act­ing as a trustee of cus­tomer data. The com­pa­nies say the ar­range­ment will keep in­for­ma­tion away from non-ger­man au­thor­i­ties. And IBM in De­cem­ber opened a re­search and sales hub for Wat­son, its cloud-based cog­ni­tive com­put­ing plat­form, in Mu­nich—a move in­tended to re­as­sure Mit­tel­stand buy­ers about the se­cu­rity of their data. “If a cus­tom cus­tomer wants data never to leave Bavaria, then it won’t,” says Har­riet Green, IBM’S gen­eral man­ager for Wat­son. “I’m be­ing i in­vited in by many, many cust tomers in Ger­many, be­cause fear ab about se­cu­rity is very, very real.”

Build­ing a na­tional-fortress clo cloud may de­feat the pur­pose of th the ex­er­cise. A key fea­ture of a cl cloud is that it gives a com­pany th the abil­ity to quickly re­con­fig­ure net­works as de­mand shifts and con­di­tions change. A And a global net­work is al­most alw al­ways more adapt­able and of­fers greater cost sav­ings than one con­fined to a spe­cific coun­try, says For­rester Re­search Se­nior An­a­lyst Paul Miller. Smaller do­mes­tic play­ers “must find com­pelling ways to dif­fer­en­ti­ate them­selves from the tech­ni­cal prow­ess, global reach, and brand recog­ni­tion of the big public clouds,” he says. “So they em­pha­size lo­cal sup­port.”

An­dreas Loff, man­ag­ing di­rec­tor of cloud-ser­vices con­sul­tant Au­tonu­bil Sys­tem, says that mes­sage res­onated with two re­cent auto in­dus­try cus­tomers. They con­sid­ered of­fer­ings from var­i­ous U.S. and Euro­pean providers be­fore set­tling on Profit­bricks. “The data doesn’t touch Amer­i­can soil if the cus­tomers don’t want,” Loff says. “That’s a big ad­van­tage.”

The bot­tom line As Ger­man in­ter­est in the cloud grows, do­mes­tic providers bet their na­tion­al­ity will give them an edge with se­cu­rity-con­scious clients.

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