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Amazon brushes off European challenge to its cloud business

(Bloomberg) --Amazon.com Inc. cast doubt over a Franco-German plan for a European cloud that would allow the continent’s businesses to keep their data from being stored in the U.S. or China.

After the European Union’s two leading nations unveiled plans for an EU-focused cloud, a spokesperson for Amazon’s AWS cloud business said such a project will lack the scale to compete with the industry’s dominant players.

“We think that the idea of a ‘national’ cloud is interesting in theory, but in reality it removes many of the fundamental benefits of cloud computing," the spokesperson said in an emailed statement. "Running technology infrastructure at the scale that we do at AWS is hard and a capital-intensive business, in which customer demands for innovation and the latest security tools are insatiable. This is also why the many proposals we have seen for “national” clouds over the years have not been seriously pursued."

With concerns mounting about both data security and the economic importance of big data, France and Germany are striving to give their companies an alternative to storing data with U.S. or Asian rivals such as Amazon or Alibaba Group Holding Ltd. On Tuesday they announced they will work together to build a “secure data infrastructure” and promised more detailed plans by the end of the year.

The move comes as Amazon’s AWS is racing for dominance in Europe and Alibaba is pushing to enter the market. Domestic competitors by comparison are struggling to gain critical mass. The use of cloud services is expanding rapidly and the technology will soon provide the architecture for everything from health care services to mining financial data.

Europe needs its own cloud infrastructure to ensure confidential data doesn’t leave the region, Tim Hoettges, chief executive officer of Deutsche Telekom AG, Europe’s most valuable telecom company, said Tuesday at a tech conference in Cologne.

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U.S. players have been making huge investments to stay ahead of the game in cloud services. Alphabet Inc. has signaled it’s ready to dent its earnings to invest in the cloud, while Microsoft Corp. is likely to get a boost from the $10 billion contract it won to run the Pentagon’s cloud.

Specialists from companies including SAP SE, Deutsche Telekom and Deutsche Bank AG have worked on the project, according to a strategy paper produced by the German Economy Ministry. Officials in Paris are still to release details of any French companies involved.

Microsoft said that it’s legitimate for Europe to seek greater digital sovereignty, but it’s a mistake to focus on where providers are based.

"Real sovereignty requires the most powerful cloud solutions -- otherwise Europe will only cement its digital gap," a Microsoft spokesperson said Tuesday in an emailed response to questions. "We believe that as a hyperscaler, we could make an important contribution."

--With assistance from Birgit Jennen

Bloomberg News