NextCloud CEO Frank Karlitschek has been banging the drum for Gaia-X since before it was even called Gaia-X.

“I’ve been running around for the last 15-20 years speaking to politicians about the problem of monopolies in the cloud sector, and I was in contact with the people in the Ministry of Economics in Germany when they came up with the original Gaia-X idea,” he recalls. “I was talking to them about it before that name existed, so I’ve been involved from the very beginning.”

European Union, EU
Gaia-X once promised to connect EU countries with its own cloud infrastructure – Thinkstock / bymandesigns

The prospect of Gaia-X was an enticing one: a federated European cloud platform big enough to challenge the market dominance of the US hyperscale providers and meet the data sovereignty needs of businesses.

Organizations from across Europe including NextCloud, an open-source enterprise collaboration platform akin to Slack or Google Workspace, signed up to the Gaia-X association, which was formed to put the grand plan into action. But since its launch in 2019, the project’s form has changed somewhat, much to the displeasure of Kalitschek, who says it has been “diluted” and that he no longer attends association meetings.

Kalitschek, who believes the project has been sabotaged from within by the hyperscalers themselves, is not alone in losing faith in Gaia-X. For others, the problems stem from excessive bureaucracy which has plagued the scheme since its inception. Whatever the cause, it now seems unlikely Gaia-X will deliver its original vision. But could a European federated cloud emerge anyway? And what role will the Gaia-X association play in the continent’s rapidly evolving digital infrastructure?

Gaia-X: The story so far

Gaia-X was conceived to solve two problems in the European market for cloud computing infrastructure.

One was the dominance of the market by the hyperscale providers, most of which are based in the US. Globally, three platforms - Amazon’s AWS, Microsoft Azure and Google Cloud - controlled 66 percent of the public cloud market at the end of 2023 according to data from industry analysts Synergy Research Group. In Europe, the trio reigns even more supreme, with Synergy’s most recent publicly available data for the continent, from September 2022, showing a 72 percent combined market share for the three companies.

When one factors in that less than half (42 percent) of European businesses bought cloud services in 2023, per figures from the EU’s Eurostat, it seems likely this stranglehold will be strengthened as the overall market grows. Europe-based cloud companies have long claimed that the hyperscalers use their, well, scale to garner an unfair advantage and stifle competition in the market. Trade association CISPE (which, somewhat ironically, counts AWS among its members) has lodged a formal complaint with the European Union against Microsoft over alleged unfair licensing terms for some of its cloud products, which remains unsettled at the time of writing.

As the hyperscaler dominance builds, businesses and public sector organizations have been increasingly concerned with data sovereignty, or where information that is stored in the public cloud geographically resides. The legality of data transfers in and out of Europe to servers and data centers in the US - a practice commonly used by many cloud companies - has been repeatedly challenged in court, with various data-sharing agreements between the EU and the US government being successfully struck down by privacy campaigners because US law is not as stringent as the EU’s GDPR when it comes to data protection.

Faced with the threat of GDPR infringements (and potentially hefty fines), ensuring European data was stored on servers in Europe suddenly became a priority for many organizations, particularly those working in heavily regulated industries, like financial services or healthcare, where much of the information concerned is highly sensitive.

Enter Gaia-X, which Kalitschek says started out as an attempt to build “Airbus, but for the cloud market.” He explains: “Airbus was an organization founded in Europe as a counterpart to [US manufacturer] Boeing - a Europe-wide company that builds planes.

“The question was: did we need a Europe-wide company that does cloud? I was very happy when the conversation went in a different direction, because rather than building one company it was decided we should try and create a virtual hyperscaler.”

Instead of starting from scratch to try and come up with the next AWS, Gaia-X’s architects in the French and German governments resolved to pool the resources of the various smaller companies in the market to create a catalog of products comparable to those on offer from a single hyperscale platform. “You would pick the services you want and combine them together,” Kalitschek says. “So you would buy storage from [French business] OVHcloud, some compute from [German cloud company] Ionos and payment services from another vendor and mix and match them together.”

Championed by Germany’s then minister of economic affairs, Peter Altmaier, and his French counterpart, Bruno Le Maire, the Gaia-X association launched in 2019 with 22 member companies, but really started ramping up its operations two years later. A further 212 companies, including a host of big names from computing and telecoms, joined the association, while Francesco Bonfiglio was appointed CEO.

Bonfiglio, an Italian with 30 years of experience in the IT industry on his CV, left the Gaia-X association last year, and says he is proud of his achievements during his time at the helm. “I had three objectives when I joined the association,” he says. “The first was to define what Gaia-X was, which I did in 2021. In 2022, we clarified how Gaia-X solves the problems it intends to solve, and in 2023 we made Gaia-X available to everyone.”

Enter the hyperscalers

What Gaia-X has created so far is a series of standards for sharing data in the cloud explains Max Claps, research director for government insights at IDC. “It quickly morphed into an international initiative that was less about protecting the sovereignty of the European digital infrastructure, and more about creating blueprints that become the gold standard for digital sovereignty, data protection, transparency, accountability and data sharing across the globe,” Claps says.

To demonstrate how this works, the Gaia-X initiative launched a series of ‘lighthouse’ projects in different industry verticals which allow businesses that are certified as Gaia-X compatible to work together through shared data infrastructure. This is in line with the European Union’s 2020 data strategy, which aims to create a series of ‘data spaces’ across the continent where businesses could pool and share information securely to try and promote economic growth.

Last year it also set up two digital clearing houses, automated systems for certifying that a business is Gaia-X compliant and allowing them to access other Gaia-X services. These are operated by Italian cloud provider Aruba and German telco T-Systems.

These digital clearing houses are significant, says Dario Maisto, senior analyst at Forrester, because they take Gaia-X “from a few slides on a Powerpoint to actual services that businesses can consume.” He explains: “It’s something we can see, that the initiative has achieved for real, and shows that it is working towards an objective.”

But he adds, “How many applications have I seen of the clearing house? Not many. No company has asked me, as an analyst, ‘How do we access the clearing house?’ or ‘What is it for?’ So it is proving the initiative is working, but whether it meets a market need is a different story.”

Talk of data spaces and digital clearing houses is far removed from the virtual hyperscaler plan, but was always part of the initiative’s ambition. Bonfiglio explains: “The X in Gaia-X is meant to represent two things - the upper part is for data ecosystems, and the lower part is for the cloud infrastructure. For many reasons, the lower part has been neglected by the association, even though it is the most urgent part we need to address.”

Bonfiglio says economic and political factors are to blame for this. In the case of the former, he explains: “When you understand the power of the data economy, you realize you can do things by sharing data that you cannot do by yourself. There is money to be made or saved by sharing data in a secure, confidential environment, without having to spend anything on technology.

“So the investment in European data spaces is a very positive thing, but this data economy still runs on data platforms that are not under European control.”

The political problems stem from the make-up of the Gaia-X association, which spans small and medium-sized businesses right up to the hyperscalers, which were welcomed in amid some controversy. These members, Bonfiglio says, have very different agendas. “There are a lot of internal conflicts of interest between European companies, European countries, and non-European members of the association,” he explains. “With an organization of 350+ members, a lot of which are small and medium businesses, not all of them can set the strategy and it’s inevitable it will be driven by the bigger companies which can influence governments.”

Some European governments have also changed their position on the US cloud providers since the announcement of Gaia-X in 2019, Bonfiglio says. “At that time we had a Trump administration and the signs from the European politicians had to be strong. They had to say they wanted to build a European cloud champion,” he says. “But between 2019 and 2021, when I started at Gaia-X, things changed. By then, some people wanted a cloud champion, some people wanted a regulator, some people wanted a standards body, and some just wanted restrictions to cut out the Americans.”

Indeed, despite preaching on the merits of digital sovereignty, European governments continue to spend money with the US hyperscalers, with Germany reportedly committing $3 billion to Oracle Cloud Infrastructure in its 2024 budget.

Bonfiglio is diplomatic when describing this situation, but his frustration is palpable. “The world has changed a little bit and these changes were reflected in the association,” he says. “But I'm not a politician, I wanted to make something happen and I knew what was needed. But when it was the moment to change things and make things run faster, things were slowed down by these internal differences. That's when I decided to step out.”

NextCloud’s Karlitschek is clear that the involvement of the hyperscalers killed off the Gaia-X idea in its original form. “I think it was actively pushed in [its current] direction by the hyperscalers,” he says. “What we’ve got is some specifications and some not-so-useful paperwork. To follow all this kind of paperwork is not possible for mid-size companies.”

Bonfiglio disputes that the hyperscalers are the problem, and says that, even though the decision to admit non-European companies was made before he took up his post, he would have done the same thing. “The statutes of the Gaia-X association were, and are still are, strong enough to prevent anyone from hijacking the project and driving it in the wrong direction,” he says. “That the project has become watered down is not the result of the Americans being involved. There were forces on the Gaia-X board, driven by European companies, that were not always going in the same direction.”

Of the relationship between Gaia-X and the hyperscalers, he adds: “Cloud - and business in general - are very pragmatic things. If you want to win the battle you have to fight on the battlefield, rather than saying ‘I don’t want to fight them because they’re too strong.’ We wanted to find new weapons for the fight [with the hyperscalers] and I think that was the right thing to do.”

Great X-pectations?

The Gaia-X association is continuing its work under a new CEO, Ulrich Ahle, and has set out a 2024 strategy based around four pillars: end-user adoption, market readiness of Gaia-X technology, globalization of the initiative and ecosystem growth.

According to Ahle, the association’s mission continues to encompass “both the data and digital infrastructure aspects, recognizing their crucial role in today’s digital landscape.”

He told DCD: “As data spaces are becoming increasingly important for AI some may perceive a focus on data spaces, [but] it’s imperative to understand that data has become a strategic asset driving sustainability and competitive advantage across various business domains. Moreover, there’s a growing need for global collaboration facilitated by shared data.”

Ahle continued that Gaia-X is rooted in European values and remains “dedicated to designing a high-performance, competitive, secure, and trustworthy federated data infrastructure.

He says: “As ‘data doesn’t flow on rainbows’, this infrastructure serves as the backbone for enabling data spaces and fostering seamless collaboration while upholding the principles of sovereignty and security.

“Thus, our approach ensures a balanced emphasis on data and digital infrastructure, aligning with the evolving demands of the digital economy and the values driving Gaia-X’s mission.”

IDC’s Claps believes the current form of Gaia-X is likely to be the extent of its ambitions. “It started with a bold vision and ended up being a community where people with good intentions meet and don't achieve much in terms of practical outcomes,” he says. “That’s not to say it isn’t useful, it has built a community that has advanced the discussions on this topic, but I don’t think it will deliver a product, and nor should it.”

Claps argues that the need for a European cloud provider has been reduced by new products on offer from the hyperscalers. All the major cloud vendors now offer some sort of sovereign cloud option that guarantees data is stored on servers in a territory of the user’s choice.

“The cloud service providers are always going to deliver products faster than an institutional initiative like Gaia-X,” he says. “I think what’s on the market now is sufficient to meet the digital sovereignty requirements of 95 percent of use cases, even in heavily regulated industries. Gaia-X has helped accelerate these regulatory-compliant regional investments from the cloud providers, but at this point, I don’t think an additional product is necessary, because it would only confuse things.”

Bonfiglio believes the idea of a European federal cloud still has legs, and since leaving Gaia-X has formed his own company, Dynamo, to try and make this a reality. He explains that it will offer a catalog of cloud products, and any cloud vendor which is signed up to Dynamo will be able to deliver their customer's services from this catalog alongside their core offering. The services will need to be compliant with Gaia-X standards to prove their trustworthiness.

As for Gaia-X itself, he says: “I think the common data spaces will be the focus of the association, and it won’t evolve the infrastructure technology side of things too much.

“In that area I think it has reached the limit of what it can do, but I am looking forward to continuing to work with the Gaia-X members because what we’re doing with Dynamo will be the fulfillment of the promise we made at the very beginning.”

As Bonfiglio presses ahead, NextCloud’s Karlitschek says his Gaia-X journey is coming to an end. “It’s very sad, because I really liked the original idea,” he says.

“We’re still a member, but I guess I should terminate it at some point to save money. I don’t see a lot of benefits there anymore.”