October 2017 - Doing Business in Germany | Cloud Computing | Data Localization

Cloud Computing Has Become a Matter of Nationality

Clouds may not care about borders, but users of cloud computing do. Especially in Germany. If your company is running a cloud-based business in Germany, you should pay as much attention to the German mentality as you pay to legislation, according to Mathias Röckel.

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Lars Riegel, Principal at Arthur D. Little and author of the eco Association studies into the smart city and smart home markets in Germany (See "Smart City & Smart Home – The Opportunities and Benefits for Companies"), talks about the German “zero-error culture.” Much of Germany’s success is based upon German engineers and technicians not releasing products before they are certain to work properly. Germans like their business safe and secure. And they like to be in control.

Does cloud computing give you less control over your data? Are applications run in the cloud more likely to fail?

Does cloud computing give you less control over your data? Are applications run in the cloud more likely to fail?

Cloud providers usually promise that the contrary is the case. Cloud computing allows businesses to reduce their time to market. Cloud computing allows business to scale easily (See interview with Süleyman Karaman from COLT, “Cloud Access: Resist Naive Assumptions”) . Cloud computing minimizes downtime (See “Digital Hypes & Their Consequences: Optimal Cloud Infrastructure for Data Monsters” by Alexander Frese from ITENOS). Applications run in the cloud make for a better customer experience (See “The Impact of Digitalization on Business Communications”, by Detlev Artelt from aixvox). And cloud computing can save your company money.

Such are the promises, and while German companies, compared with their European counterparts, are less eager to move to the cloud, they don’t generally question the cloud benefits. They just want to see proof before making a move.

How many lawyers does it take to answer a regulatory question? 

How are you going to prove that cloud computing is fine? This is when matters become a bit more complex because this is when legislation and regulation need to be understood.

One of the main questions companies need to answer before moving to the cloud: How will we comply with European and national data privacy and cloud privacy? Even EuroCloud, the pan-European cloud innovation hub, admits this is difficult to answer: “Cloud service providers and users alike are faced with major obstacles in regard to data protection, causing us to suffer massive and unacceptable competitive disadvantages in comparison with, for example, the USA. It is a reality that the many different European data protection rules act as a significant hurdle to IT service (and cloud) customers as well as providers.” 

EuroCloud took the challenge nevertheless and, aided by 44 lawyers from 33 countries, designed an online tool that lets anyone see what European and national laws they must comply with in the cloud (See “Cloud and Data Protection - A Challenge to Users”). The outcome not only depends on the location of the company, but also on the kind of data processed in the cloud (personal or not?), on third parties that might be involved (including the cloud provider), on cross-border data traffic (does your data leave the country?), and, finally, on the involvement of potential subcontractors. 

The tool is remarkably easy to use, given the complexity of the situation.

You can access the tool here: cloudprivacycheck.eu. The tool is remarkably easy to use. But it does not change the complexity of the situation, which is why some providers are taking a different approach.

Putting the cloud in their boundaries

Germans want to be in control, and they face strict regulatory requirements. How can these obstacles be overcome? One solution is to create a national cloud, which is what Microsoft did with its German Microsoft Cloud.  Data stored and processed here is guaranteed to stay within the national borders. And by using external data centers, such as Interxion’s in Frankfurt, and Telekom’s in Berlin and Magdeburg, Microsoft shields its own company from its customers’ data, adding another layer of security.

Amazon is following a very similar approach with AWS, promising that “customers can control where and how their content is stored and who has access to it.” Other companies that offer highly specialized services, such as the German data room provider Brainloop, have also discovered the importance of data residency, and they highlight the location of their data centers in Germany (and other European countries).

If you are thinking about running a cloud-based business in Germany, you can learn more about the peculiarities of Germany and other European countries by joining the services of EuroCloud