April 16, 2021

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Europe’s answer to U.S. and Chinese tech giants’ power

Peter Altmaier (CDU), Federal Minister of Economics and Energy, speaks at the virtual Gaia-X expert forum of the Federal Ministry of Economics.

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The two biggest economies in the European Union hope they have an answer to the domination enjoyed by American and Chinese companies in the cloud computing industry: Gaia X

Amazon, Microsoft, Google and Alibaba are the four main players globally when it comes to cloud services. However, European policymakers have grown anxious about their dependence on a small number of major tech companies, which aren’t European.

That has been the case in particular since the United States enacted a law in 2018 that compels U.S. firms to hand in data to American authorities even if the latter is stored elsewhere in the world. Germany and France have concerns that the data of European citizens is at risk.

“Gaia X is a two-fold approach to a problem we face in Europe and a problem that every company in the world faces right now,” Marco-Alexander Breit, head of Task Force Artificial Intelligence at the German economy ministry, told CNBC’s “Beyond the Valley” podcast.

“We combine infrastructure services like data storage, data processing in Europe, but it is open for participation even for companies that are not from European origin, as long as they stick to our rules and adhere to our standards,” said Breit, who is heads the Gaia X project in Germany.

It is about realizing that relying too much maybe on external players, whether they are American or Chinese or from anywhere else, is not great in the new economy…

Dexter Thillien

senior industry analyst, Fitch Solutions

The Franco-German project, born in 2018, aims to provide a secure infrastructure for data, while simultaneously allowing companies to move data across borders. Its overarching principle is to enable European nations to become digitally sovereign — a concept that has gained traction in recent years and could prove challenging for the traditional tech giants.

It’s a “first step toward a broader ambition,” said Dexter Thillien, senior industry analyst at Fitch Solutions.

“It is about realizing that relying too much maybe on external players, whether they are American or Chinese or from anywhere else, is not great in the new economy where data is going to be more important, and you need a European alternative,” he added.

More than 300 organizations worldwide are involved with the project so far, including Orange, Deutsche Telekom and SAP. The goal is to launch the infrastructure in late 2020 or early 2021.

Gaia X would, for instance, give healthcare providers the ability to exchange data and algorithms in a safe way with other hospitals in their proximity. That could in turn help with emergency transplants and other life-threatening conditions.

However, the initiative has to become more attractive than the big players if it wants to succeed, Thillien said.

“It is not going to be easy for that product to find its place,” he said, citing budget and technical constraints.

The annual budget for Gaia X is 1.5 million euros ($1.7 million).

Nonetheless, Breit said he believes those seemingly limited financial resources “are not important.”

“The X framework and the X entity has only the responsibilities to make the ecosystem work, to negotiate the standards, to negotiate the rules, and to provide standardized IPs for example to make the software run,” he said, adding that the major advancements in artificial intelligence would remain a task for the big tech companies themselves.

IP, or internet protocol, refers to a set of rules that facilitates the movement of data across networks. There are varying IP standards.

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