With the EU Commission having set out its vision of a European “Digital Decade”, T-Systems CEO Adel Al-Saleh identifies the challenges European IT companies face and the kick-start the industry needs.
I followed with great interest yesterday as the European Commission held its press conference on Europe’s “digital decade”. Expanding on President Ursula von der Leyen’s State of the Union speech in September last year, the Commission presented its vision for Europe’s digital transformation. Targets for 2030 include three quarters of all companies using cloud services and making all public services available online. These are goals which Deutsche Telekom has long been committed to.
To deliver this basic level of digitalization, Europe needs European players. And among this talk of digital transformation targets, one thing was brought into sharp focus for me: Telekom’s T-Systems is the last major, globally-active IT provider with headquarters in Germany. Providers from all over the world are pushing into our market. But the federal government values having a German-based service provider. You only have to look at the areas T-Systems is heavily involved in. Some of our main calling cards: sovereign data centers, Toll Collect, digital identity, Gaia-X and of course the Corona Warn App. Politically, these projects have one thing in common: Germany sees them as critical and sensitive areas in which it wants to be sovereign. The projects need to be developed, delivered and managed by a German organization in order to ensure security and control.
To ensure this continues, we need more than a strong track record for sensitive government contracts. We cannot cross our fingers and hope that national loyalty wins out, watching on as contracts are awarded to the cheapest bidders. That is the path to irrelevance for the European IT industry. To be successful, we need conditions that allow us to nurture creativity and innovation on our continent. A playing field which allows German and European companies to compete. After three years as the CEO of T-Systems, I can tell you: continued success as a German IT company is very difficult.
It is difficult to compete in Germany
The IT business is uniquely flexible. Digital Services can be relocated overnight with the click of a mouse. You can move workloads to the USA or Asia with little cost and no business disruption. Entire data centers move continents within a few hours. This kind of offshoring does not even depend on attractive destinations. New data centers, for example, are no longer built in cities, but in their surrounding areas. All you need is cheap electricity and a network connection. How does Germany stay relevant?
Let me share some practical experience: It takes years to get a power connection for a data center in Germany. This is the experience we had in Magdeburg. In addition, the prices for renewable energy to power these centers are twice as high as in the Netherlands. That’s why we chose Amsterdam as the location of a new data center project. This decision will save us millions.
Electricity prices are not the only competitive disadvantage for IT providers operating from Germany. Labor costs are high by international standards. As the global market evolves, there is limited flexibility to transform systems, skills, organizational setups and tools. It takes too much time to make changes. Regulations are strict, especially around telecommunications. Environmental protection requirements are complex – an example is the unclear rules around the utilization of waste heat. Permitting procedures take a long time. Without clear rules and support, Europe is missing the opportunity to take the lead in the vital area of energy-efficient datacenters.
Bridge the competitive disadvantages
In Europe we are often only spectators. Take the chip industry for example. I hope that the “European Processor Initiative” (EPI) for independence in High Performance Computing Processor Technologies produces quick and exciting results. This would greatly strengthen the competitiveness and leadership of European industry and science. But as things stand, Germany and Europe cannot offer an alternative to NVIDIA in delivering in-vehicle computer system and AI computing infrastructure to Mercedes-Benz. And this is true in other areas of technology as well. Germany’s prized automotive industry is threatened by emerging non-traditional competitors, fueled by digital innovation. We need to enhance European participation in key digital technologies and promote innovation. We must safeguard high-quality jobs and prevent the drain of human capital. We must also protect our data capital and encourage German and European business to flourish through digitalization.
Corona Warning App is a template for the future
There is a lot of discussion about the Corona Warning App. Mostly it's about features, privacy and impact. What isn’t often talked about is the boost the model of the project could give to digitalization projects in Germany. In just 50 days we developed the app’s software together with SAP. Now it has been in operation for just over nine months. It has been downloaded about 26 million times – around 30% of the entire population. The app works, and we are improving it all the time. Yes, there have been difficulties. But we have overcome them together in an agile project: the Federal Government, the RKI, the Fraunhofer Institute, Google, Apple, SAP, Telekom and many associations, laboratories and other supporters have worked hard to achieve an unparalleled public-private partnership. This should serve as a template for the future.
The experiences of that project can be applied to the EU's Gaia-X sovereign cloud project. Gaia-X should ensure that European data capital does not drift away to the USA or Asia. Industrial data in particular is a German strength. We have the technology; we have the industry. We must make the most of this competitive advantage. Deutsche Telekom is one of the founding members of Gaia-X. We believe that data as well as technology sovereignty is important and will become even more important in the future. Technological dependency is unwise against today’s geopolitical backdrop.
This does not mean we want to play against hyperscalers like Microsoft, AWS, or Alibaba. Rather, a sovereign cloud like Gaia-X should complement a multi-cloud strategy and connect multiple platforms – providing the highest possible level of flexibility. Businesses, as well as the public sector, are calling for this kind of standardization. Delivering this will lower barriers and accelerate digitalization, especially in the Mittelstand – crucial to Germany and Europe’s future prosperity. We have partnered with SAP to deliver a fully open-source, highly efficient and completely sovereign software technology stack for the European project.
We need a kick-start
The challenge with Gaia-X is getting started. Not just with research projects, but truly productive environments in Germany. The Catena-X automotive alliance is a promising start, with key players from the entire automotive value chain. But in order for the project to gain critical mass quickly, we need a kick-start with significant public-sector investment. I am talking about German government – federal and local – helping to build scale by encouraging investment and then promoting adoption of sovereign cloud solutions across the private sector.
Let's learn from the agile cooperation between the federal government and industry on the Corona Warning App and push ahead with Gaia-X and other projects. A "typically German" approach of planning things down to the last detail and then starting implementation far too late leaves us behind our competitors. Let us have the courage to work in a more "agile" way: Not perfection, but "safe enough to try".