Europe’s cloud market is giving a big boost to US giants like Amazon and Salesforce

What is the cloud?

What is the cloud?   3:22 AM ET Fri, 23 Nov 2018 | 02:50

Over the past year, Europe’s tech sector has been overshadowed by privacy scandals, stricter regulation and the trade war between the U.S. and China.

But there’s one bright spot where the outlook isn’t quite so bleak: cloud computing.

Europe’s public cloud market is expected to grow at a 22 percent rate for the next three years, according to the International Data Corporation (IDC). The trend is showing up in earnings reports of U.S. companies from small cloud firms to enterprise software giants.

Salesforce, for example, reported 31 percent revenue growth in its European business last quarter.

“We were the fastest growing region in the world, even though some of them are smaller, so we’re obviously very excited about that,” Chris Ciauri, Executive Vice President of Salesforce EMEA, told CNBC in a phone interview in December.

“Allergic to hype”

Cloud computing allows businesses and consumers to store and access data, apps and software over the internet, instead of locally on a hard drive or server. Global investment in cloud services has surged in recent years as more companies have adopted online infrastructure offered by tech giants like Amazon, Microsoft and Google. Research firm Gartner estimates worldwide public cloud revenue will top $278 billion in 2021, up from $145 billion in 2017.

There is a common assumption that European organizations are 18 to 24 months behind the U.S. when it comes to cloud adoption, according to a report published in 2018 by IDC senior program director of European software Carla Arend. Arend said the issue is less about European companies lagging behind and more about a cautious, pragmatic attitude toward new technology that is culturally different than in other regions.

“European organizations, they are quite allergic to hype,” she said in a phone interview with CNBC last week. “Only when they really see the tangible benefits, will they embrace the technology.”

Arend said that, after taking the time to evaluate the benefits and challenges of moving operations off-premises and into the cloud, European organizations are now getting into the market fast.

Salesforce’s Ciauri pointed to clients that range from Aston Martin to Eurostar to Spanish bank BBVA that have recently embraced cloud solutions.

Lack of European cloud players

Another reason U.S. firms are benefiting from cloud adoption in Europe is a lack of alternatives.

“There are no European megacloud providers,” said Lauren Nelson, a principal analyst at research firm Forrester, in an email to CNBC. “This means using a U.S.-headquartered company or a smaller player.”

U.S. cloud players are filling the void with expansion plans across Europe. In December, Amazon’s AWS opened new data centers in Sweden, and the company says it already serves “tens of thousands” of customers in the Nordics. Microsoft announced plans last year to build data centers in Norway, Germany and Switzerland.

Chinese firms are also competing for the European market. Tech titan Alibaba expanded its presence in Europe in October with new data centers in the U.K.