European cloud providers are struggling to cash in on growing demand for off-premise services from enterprises across the continent, according to data from IT market watcher Synergy Research Group.
The analyst house’s latest regional cloud market tracker data shows that the European cloud market has tripled in size over the past four years to $6.9bn, as of the third quarter of 2020, but local providers are not necessarily reaping the benefits of this growth.
In fact, Synergy’s data shows that European cloud providers have collectively lost 10 percentage points of market share over the last four years, which has been hoovered up by global players such as Amazon Web Services (AWS), Microsoft and Google Cloud.
“Many of the European cloud providers are still growing, but they continue to lose ground to their big US competitors,” said John Dinsdale, chief analyst at Synergy Research Group. “Amazon, Microsoft and Google together now account for two-thirds (66%) of the European market; 12 quarters ago, they accounted for ‘only’ half of the market.”
Meanwhile, the European cloud community now has a hold on just 16% of the market, Synergy’s data shows, down from 26% at the start of 2017.
“Part of the reaction of European companies has been to focus on opportunities and use cases where data sovereignty and privacy issues are key,” said Dinsdale. “This is all well and good, but it hardly moves the needle in terms of changing their competitive positioning in the rapidly growing cloud market.”
Looking ahead, Synergy predicts that the amount spent on European cloud infrastructure services throughout 2020 will be up 31% year on year and exceed €23bn, with infrastructure-as-a-service (IaaS) and platform-as-a-service (PaaS) accounting for almost 80% of this spend.
“European cloud providers are trying to gain more traction in the market by focusing on customer segments and use cases that have stricter data sovereignty and privacy requirements,” said Dinsdale. “This has led to the Gaia-X initiative, which represents an attempt to reverse the fortunes of the European cloud industry.
“Their efforts are laudable, but the trouble is that this is a bit like King Canute attempting to stop an incoming tide. The big three US cloud providers now have 67 hyperscale datacentres in Europe and over 150 additional local points of presence, while the tier two US providers have another 36 major datacentres.
“In total, their European capex over the last four quarters has totalled €12bn, up 20% from the previous four quarters. European firms are facing a huge challenge if they want to break out of their niche-like positions – the revenue growth opportunities are massive, but so too is the funding and willpower required to tap into those opportunities.”