Bloomberg News

SAP Joins Atos to Target State Cloud Deals Amid Spy Threats (1)

January 27, 2014

A Logo sits Above the SAP AG Headquarters in Walldorf

SAP and Atos are vying with Microsoft Corp., Oracle Corp and International Business Machines Corp. as the market for government cloud contracts - orders to handle services and data accessed over the Web - is forecast to double to more than $100 billion in three years. Photographer: Ralph Orlowski/Bloomberg

SAP AG (SAP) and Atos are accelerating an effort to help European governments protect citizens’ data, in the biggest push by the region’s software providers to counter spying threats since leaks about the U.S. National Security Agency’s data-collection programs.

The German and French technology companies are working with the European Union to define standards for Web-based programs and data-storage services, SAP co-Chief Executive Officer Jim Hagemann Snabe said in an interview. The aim, backed by European Union Digital Agenda Commissioner Neelie Kroes, is to come up with labels that signal to authorities which services and programs are safe, potentially spurring demand, he said.

SAP and Atos are vying with Microsoft Corp. (MSFT:US), Oracle Corp (ORCL:US) and International Business Machines Corp. (IBM:US) as the market for government cloud contracts -- orders to handle services and data accessed over the Web -- is forecast to double to more than $100 billion in three years. Governments are stepping up information-technology investments amid revelations about U.S. spying and increasing frequency of hacking incidents.

“The political side has grown massively aware of the opportunity of cloud but also the risks associated with cloud,” Snabe said last week at SAP’s headquarters in Walldorf, Germany. “We’re working with the EU Commission, but also the United States and other countries to try and define what we believe are the principals for a trusted cloud.”

European Cloud

The European effort for standards seeks to go beyond existing nation-bound projects touting safe cloud services. The goal is to avoid the restrictions that could come from a country-per-country approach, a representative for Bezons, France-based Atos said.

While reports about spying by the NSA, leaked by former government contractor Edward Snowden, have prompted some consumers and businesses to switch providers for Internet services like e-mail and remote storage of files, governments have yet to respond with major changes to their information-technology contracts.

Snabe and Atos CEO Thierry Breton are members of a committee called the European Cloud Partnership, which advises the European Commission on cloud strategy. Other members include Ericsson AB CEO Hans Vestberg, Amazon.com Inc. Chief Technology Officer Werner Vogels and Matthew Key, head of Telefonica SA’s digital unit.

The companies are seeking a competitive advantage in the race for contracts, betting the Europe-wide effort for cloud standards will encourage state spending on computer services.

‘Maintain Trust’

“The public sector holds a huge amount of sensitive data on people,” said Neville Cannon, an analyst at Gartner Inc. “It’s absolutely vital for the public sector to maintain trust and confidence. Some of it has been eroded because of the NSA issues.”

SAP rose 1.6 percent to 57.70 euros at 9:46 a.m. in Frankfurt. Atos slipped 1.2 percent to 65.08 euros in Paris.

European concerns about data security heightened last year as documents leaked by Snowden revealed spying activities targeting companies, European Union institutions and governments. SAP and Atos (ATO), which had discussed the partnership before the leaks began in June, have intensified work since, according to two people familiar with the matter.

Global spending on cloud services by governments will grow to $107 billion in 2017 from $47.4 billion last year, researcher IDC predicted in September. Local authorities, though they handle sensitive data about citizens and companies, often lack the technical expertise to help them cope with a rising number of computer threats and attacks.

Privacy Rules

A lot of the data held by governments, especially public and less sensitive information, could be stored by cloud-services providers, making it easier to access and analyze it, said Gartner’s Cannon. Military or intelligence data won’t be stored in the cloud, he said.

Diverging international rules on data privacy have put the world’s Internet companies into a position where they may have to violate rules in one region if they want to comply with demands in another to allow access to data.

“We’re helping the European Commission avoid rules for the cloud per country -- we think that’s wrong,” Snabe said.

The creation of single European standards for cloud services would be a boon for local service providers, EU’s Kroes said in a blog posting on Nov. 14.

“We should not put up barriers within our single market,” Kroes said. “Such barriers if anything would limit European leadership, so we continue to rely on solutions from overseas.”

To contact the reporters on this story: Cornelius Rahn in Berlin at crahn2@bloomberg.net; Marie Mawad in Paris at mmawad1@bloomberg.net; Helene Fouquet in Paris at hfouquet1@bloomberg.net

To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net


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