(Submission for the European Commission's "Single Market Strategy" - also available here)
1. Executive Summary
Euclidia, representing European SMEs in the cloud sector, welcomes the European Commission’s initiative to develop a Single Market Strategy for 2025. We believe that an integrated and modernized Single Market is key to bolster European competitiveness, foster innovation, and ensure digital sovereignty.
Foremost we would like to stress the critical importance of sound impact studies on the impact on EU technological SMEs market share of any new regulation and the importance to review existing regulation in the light of european technological SMEs competitiveness prior to new regulation. Level playing field with other geopolitical blocks is important if a Single Market Strategy is to be successfull. In agreement with Draghi’s report we think that ‘cost of doing business’ in the cloud sector should go down for european technological SMEs. The straightforward way is to diminish the compliance burden.
Our response emphasizes the critical importance of enforceable interoperability based on strict open standards, targeted support for European SMEs, and a strategic focus on digital sovereignty within the Single Market framework. These principles are fundamental to removing barriers, promoting cross-border trade, empowering SMEs, and ultimately achieving a resilient, competitive, and digitally sovereign European digital ecosystem.
2. Problem Definition: Barriers to the Single Market and the Need for a Paradigm Shift
Euclidia agrees with the Commission’s assessment that regulatory and administrative barriers continue to hamper the Single Market, particularly in the cross-border provision of services. However, we contend that the current approach to the Single Market, while aiming to enhance competitiveness, has inadvertently created an environment that favors large, non-European digital platforms, particularly in the cloud sector. This has resulted in several critical challenges:
- Dominance of Non-European Hyperscalers: The European cloud market is dominated by a few large, non-European hyperscalers, creating significant dependencies and undermining European digital sovereignty. Their proprietary technologies and closed ecosystems limit competition, stifle innovation, and create vendor lock-in.
- Unfair Competitive Advantages: These hyperscalers often benefit from regulatory frameworks that are not adequately enforced, allowing them to engage in practices that disadvantage smaller European competitors, such as predatory pricing and tax optimization strategies.
- Barriers to SME Growth: European SMEs, particularly in the cloud sector, face significant hurdles in scaling up and competing with these giants. These hurdles include limited access to funding, complex regulatory requirements, and the difficulty of penetrating markets dominated by established players. Cost of doing business has increased in the past 5 years with the number or EU regulations put in place. Aimed at non european hyperscalers, they too often end up being enforced primarily on EU tech SMEs. We would like to stress that these barriers have gone the wrong way in the last years which should be assessed. Regulations that should have been level playing field regulations ended up being barriers to local SMEs growth.
- Data Sovereignty and Security Concerns: The reliance on non-European cloud providers raises serious concerns about data sovereignty, security, and privacy. The extraterritorial reach of laws like the US CLOUD Act further complicates this issue, potentially exposing European data to access by foreign governments. In this respect EUCLIDIA stands for assessing sovereignety not only in legal and shareholders nationality terms but really importantly in terms of ability to understand, develop, operate key technologies.
- Lack of Enforceable Interoperability: The absence of strong, enforceable interoperability requirements based on strict open standards (EIFv1) exacerbates vendor lock-in and limits the ability of European businesses to choose and combine different cloud services.
3. A Framework for a Sovereign and Competitive Single Market
To address these challenges and build a truly sovereign and competitive European digital ecosystem, we advocate for a comprehensive approach based on the following principles:
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SME-Friendly Regulations: Regulatory frameworks should be reformed to remove unnecessary burdens on European SMEs and promote a level playing field. In the light of Draghi’s report we call for differentiated approach to regulation between european technological SMEs and non european actors or european distributors of non european technology. For european technological SMEs less regulation is now a matter of survival : compliance cost is stifling innovation.
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Primacy of European SMEs: Supporting the growth and success of European SMEs in the cloud sector is paramount. This requires creating a level playing field where they have the resources and opportunities to compete globally.
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Digital Sovereignty as a Strategic Imperative: Promoting European technological independence and reducing reliance on non-European technologies is essential, particularly in critical areas like cloud infrastructure, cybersecurity, and data management. Resilience should be promoted everywhere. In today’s geopolitical context European countries should have a plan B for every critical layers of tech infrastructure.
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Promoting European Hardware Solutions: Recognizing the importance of reducing dependence on non-European hardware and promoting European-based solutions.
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Enforceable Interoperability through Strict Open Standards: Interoperability, based on strict open standards (EIFv1), must be a fundamental principle of the Single Market, ensuring seamless data exchange and preventing vendor lock-in.
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Strategic Use of Public Funding and Procurement: Public funding and procurement should be directed towards European cloud solutions and open source projects, with a focus on supporting SMEs and fostering innovation.
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Harmonized European Policies: A unified European approach to cloud strategy and digital sovereignty is needed, avoiding fragmented national policies that undermine the Single Market.
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Open Source and Open Standards as Cornerstones: Open source software and open standards should be prioritized in public procurement and digital infrastructure projects to ensure transparency, security, and long-term sustainability.
4. Specific Recommendations for the Single Market Strategy 2025
Euclidia proposes the following concrete recommendations for the Single Market Strategy for 2025:
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Emergency act to reassess compliance cost and cost of doing business in the European Union : a general impact study should be conducted and a waiver of most harmful regulations considered for SMEs.
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Establish a European Sovereign Cloud Fund: Create a dedicated fund to support the development and growth of European cloud SMEs, with a focus on projects that adhere to strict open standards, enforceable interoperability, and open source principles. This fund should prioritize “moonshot” projects that aim to develop cutting-edge cloud and edge technologies, where Europe can demonstrate leadership.
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Introduce technology resilience (ie : having a plan B for everything) as a critical aspect of sovereignety and security in the cyberspace.
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Mandate Enforceable Interoperability: Develop and enforce legally binding requirements for interoperability in cloud services, based on strict open standards (EIFv1). This should include:
- Mandatory open APIs for data portability and service integration.
- A zero-cost cap on data egress fees when switching providers.
- Standardization of data formats and protocols.
- Independent verification mechanisms for interoperability claims.
- Dispute resolution mechanisms to address non-compliance.
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Reform Public Procurement:
- Implement an “Open Source and European Cloud First” policy, requiring public administrations to prioritize European cloud solutions based on open source technologies and strict open standards.
- Introduce “Buy European” provisions, reserving a portion of public procurement budgets for European cloud SMEs, to ensure that European innovation is supported by public funds.
- Simplify procurement processes for SMEs and promote modular procurement to break down large contracts.
- Mandate the use of comprehensive life-cycle costing models that consider long-term costs, including interoperability and exit costs.
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Create a “European Cloud” Label: Develop a recognizable label for cloud services that adhere to strict open standards, enforceable interoperability, European data protection principles, and a commitment to open source development. This label would provide a clear signal to the market, promoting trust and facilitating the identification of truly sovereign European solutions.
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Strengthen the Digital Markets Act (DMA) and its Enforcement: Ensure rigorous enforcement of the DMA, particularly regarding interoperability, data portability, and self-preferencing. Consider expanding the scope of the DMA to include more stringent requirements for open standards and interoperability within designated Core Platform Services (CPS).
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Promote Digital Skills and Open Source Expertise: Invest in training programs to develop a workforce proficient in open source technologies, cloud computing, and interoperability standards, with a focus on reskilling and upskilling initiatives. This is crucial for supporting the growth of a vibrant European open source ecosystem.
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Foster Public-Private Partnerships for Innovation: Establish public-private partnerships focused on developing next-generation cloud and edge technologies based on open source and open standards. These partnerships should prioritize European SME involvement and aim for ambitious projects that can position Europe as a global leader. We need to learn from past failures.
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Address Market Concentration: Implement stronger antitrust measures to address the dominance of non-European hyperscalers and ensure fair competition in the European cloud market. This could involve stricter scrutiny of mergers and acquisitions, investigations into anti-competitive practices, but first and foremost, the promotion of alternative, European-led cloud ecosystems.
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Promote European Hardware Solutions: Develop a strategy to reduce dependence on non-European hardware, particularly for critical infrastructure. This could involve supporting the development of European-based hardware solutions or ensuring that critical components are sourced from trusted European manufacturers.
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Reject Fragmented National Approaches: The Commission should actively discourage fragmented national cloud strategies and promote a unified European approach to cloud sovereignty, based on common standards and interoperability.
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Resist “Sovereignty Washing” Initiatives: The Commission should be wary of initiatives that offer a facade of sovereignty while still relying on non-European technologies or creating new forms of lock-in. The focus should be on genuine technological independence and open solutions.
5. Conclusion
The Single Market Strategy for 2025 is an opportunity for Europe to assert its digital sovereignty and build a more competitive, innovative, and resilient digital ecosystem. By embracing the principles outlined in this response, particularly the emphasis on reducing cost of doing business for technological european SMEs, enforceable interoperability, strict open standards, support for European SMEs, and a strategic focus on open source, the European Commission can create a Single Market that truly serves the interests of European businesses and citizens. We urge the Commission to adopt a bold and ambitious approach, recognizing that digital sovereignty is not just a technical issue but a strategic imperative. By implementing the recommendations outlined in this response, the EU can ensure that the Single Market becomes a driver of European innovation, competitiveness and autonomy rather than a conduit for the dominance of non-European tech giants.