Digital Revolution: Opportunities for European Companies.
The data revolution, the fourth revolution, the era of artificial intelligence or the era of Big Data, whatever you want to call it, supposes a technological revolution that changes and destroys the life habits of human beings faster than what it had never happened before in the history of mankind.
This new era, regarding to data collection, management and exploitation has as its protagonists the most important industrial and technological companies on the planet, which due to this activity will experience spectacular growth in the next decade.
What sectors are leading this technological revolution?
We identify the leading industries of the new era by answering three basic questions:
ü Where is the data found? Regarding storage (bytes) the answer is in the Cloud Computing industry and regarding its capture, local storage, and transfer (bits) it is in the IOT (Internet of Things).
ü What is going to be done with this data? The answer is Artificial Intelligence, machine learning, deep learning, virtual and augmented reality.
ü Who is going to protect this world of data or the citizen? The answer will be given by advances in cybersecurity, by state regulation and by ethics committees.
We are going to delve into the first of these questions and save the other two for future articles.
What level of data are we going to handle?
The estimated growth of global stored data and traffic will grow from 75 Zetabytes in 2021 to about 200 Zb in 2025, of which half will be stored and the other half traffic. This growth will be even more dramatic from 2025, for which there is no precise estimate, given the explosion of data required by all industries, such as the connected unguided vehicle, the Mark Zuckerberg metaverse or the evolution of IoT embedded in people.
Some examples to illustrate the data boom:
ü In seven years, the storage capacity of the Iphone has multiplied by 30.
ü The connected land vehicle is estimated to consume 40 Tb / hour, the equivalent of 3,000 years of use of an iPhone, when estimates in 2016 were 4 T / day, almost 80 times less than current estimates, based on real vehicles. The Israeli company Mobileye, part of the Intel group, will operate together with Sixt the autonomous taxi service in Munich next year. The air taxi is partially operational in China, with the Eheng company or scheduled to operate in Stuttgart in 2024, with Lilli company. While leading sensor and camera technology makes the device expensive (approx. € 30k / taxi), the cost is expected to drop substantially (€ 4K / taxi) and it will become a massive service.
ü The use of data by the IoT industry has increased in five years from 17 Zb to 73 Zetabytes (2025) and CAGR is estimated to be higher than 25.6% from 2028, which means doubling every three years.
ü Overall mobile data traffic is estimated to grow at an annual rate of around 55% in 2020-2030 to reach 607 exabytes (EB) in 2025 and 5,016 EB in 2030, a 700% growth.
ü And all this without considering the consequences that the success of the Facebook metaverse could have on the data ten years from now (or Nvidia, Microsoft or the winner in the race). If we take into account that in 2021 4,500 million human beings have used social networks and the average American is connected to social networks an average of 2.5 hours a day and the Internet more than 7.5 hours / day, the level of data that it will require storing and transmitting this new world will be titanic.
All of the above gives us the idea of an immediate future with stratospheric data consumption that will require a change in the Cloud industry.
Why is the US leading this revolution?
In this expansion, the leadership is led by the US, with China and Russia as potential competitors. The advantages of the United States with respect to Europe come from four areas, necessarily interconnected:
Economic advantages, derived from the enormous capital of money that its technological giants mobilize.
The first six leading companies in the American technology market have a market value equivalent to eight and a half times the value of Spanish GDP in 2021, and are also fifteen times larger than their Chinese competitors Alibaba and Tencent. The GAFA together with Microsoft invested only in 2020 and only in R&D focused on the digital world and key technologies an amount of 126 B $, which overwhelms when comparing the amounts invested in similar concepts in the EU, which in no case reach the 10 B € / year.
This can give an idea of the amount of resources dedicated to the acquisition of companies, investment in R&D, international lobbying capacity, economic influence, etc.
The European reality is that the majority of PE funds are focused on projects developed at the levels closest to commercialization (7 to 9 on the TRL scale), which makes it difficult to create leading platforms on this continent.
Regulatory advantages, derived from a lax legislation on data protection.
In US there is nothing comparable to the LOPD but only sectoral regulations. And this is so in part because the collaboration demanded by the American Government and the Pentagon from data holders is very frequent, despite a tense relationship with some such as Facebook, which it has sued for a monopoly with Twitter and Whats up. And it is so despite the efforts of both Republican and Democratic congressmen to push forward a federal data protection law, which finds not only the problem of judicial execution of sentences between states but also the opposition of technology lobbies.
China recently passed the Data Protection Law, which defines "data" as "any record of information in digital or other forms" and "data processing" includes, but is not limited to, the collection, storage, processing use, processing, transmission, provision and public disclosure of data. In case the data is related to a natural person, it could also be considered as "personal information", in which case it would be subject to the rules and regulations protection of personal data in China. In addition, it establishes criminal sanctions and license revocation. With this law, China shields itself against possible interference from its American competitors and leaves a wide capacity in the application of it to the Chinese authorities.
Geopolitical advantages, which lead to technological monopolies, both in the US and in Russia and China.
The three nations have much more aligned and faster command units than Europe, as well as a more widespread awareness among their authorities of the war their countries are waging at the technological level.
Suffice it as an example that the American Department of Defense (DoD) will invest in 2021 in Cyberspace the amount of 9.8 B $, including Cybersecurity (5.4 B $), Cyberspace (3.8 B $), Science and Technology (556 M $), in addition of other items for Artificial Intelligence ($ 841 million) and Cloud ($ 789 million).
On the other hand, only the budget assigned by the American DARPA, the organization that led the second round of Google financing, is 3,500 M $ / year for disruptive technological projects, equivalent to thirty times more than that assigned this year for projects of industrial and development research in the fields of artificial intelligence and other digital technologies in Spain.
It should be added that the DoD and the Pentagon have total flexibility when it comes to investing in projects that they consider strategic, such as those related to technological warfare, being able to reclassify expenditure items without giving any explanation to Congress or passing their audits (“the Pentagon 35 Trillion accounting black hole”).
Ideological advantages, organized around transhumanism, a technological neo-gnosticism that aims to save human beings from the development of artificial intelligence, machine learning and the creation of human beings integrated into machines that will only be accessed by a technological elite and economic, while the rest of us will be mere mortals.
This ideology is driven by the richest men on the planet, such as Elon Musk, Jeff Bezos, with his commitment to eternal life and life in space, Larry Page and Sergei Brin. And by countless scientists, engineers, computer scientists and entrepreneurs from the elite of Silicon Valley, MIT and Oxford University, such as Ray Kurtzweil, Google's AI director, convinced that he will live forever or like Nick Bostrom, philosopher of the University of Oxford, which clearly states that human beings are a virtual reality generated by our descendants.
Transhumanism gives the axiological bases to advance in the technological revolution to companies and states that may have ethical prejudices. And it is an advantage, although it may be sinister, compared to a Europe hostage to its Judeo-Christian background, its limits to bioethics and its philosophical tradition.
In other words, the United States already has defined the ideological justifications to ensure the conquest of the digital world, just as the crusaders had in Europe in the Middle Ages to expand their empires. And to convince the world that the consequences of this revolution are desirable.
And what option do we have left in Europe?
In view of the above, it will be the US DoD and large American companies that will dominate the data sector with their deployment of private and public resources, ideas and regulatory advantages.
Even so, in Cloud and Data Centers some of the drivers can favor Europe, its member countries and local companies.
The integration of AI in what was once just data storage is an industry driver.
Cloud companies must be global, but ensure proximity to IoT devices, connectivity and sustainability. They must have economies of scale but be very close to local regulations. They must be able to ensure preventive and palliative quality and speed, guarantee virtual and physical security of the installation, ensure redundancy of electricity and cold supply, etc.
The efficiency in the transmission and storage of the data will be required, marked by the proximity and adaptation of the devices (ubiquitous computing), the idea that any device can be connected to an infinite network of other devices, combining current network technologies with wireless computing (pervasive connectivity).
Advances in artificial intelligence and the increase in its demand by large companies will cause cloud vendors to diversify their service packages, moving from those that were traditionally linked to storage to others focused on advanced data analytics, artificial intelligence, or integration DevSecOps services.
Relocation, access to energy sources and control of physical data is and will also be a driver for the sector.
When the data explosion hits in a hyper-connected world, local servers will be a must. It will not be efficient to send amounts of data to keep our company active to servers located in Iowa, Oklahoma, North Carolina, or Lulea (Sweden). The trend is to return to having infrastructures close to the point of use (cloud to edge infrastructure).
A brake on expansion may be the lack of energy capacity. For the data location not just any location will be possible. As an example, FLAP (Frankfurt London Amsterdam and Paris) where we find the highest concentration of Data Centers in Europe, but with energy availability problems in Amsterdam and London.
European states, powerless in the face of US ownership of virtual data, must support companies that guarantee ownership of physical data, that is, the local Cloud.
Part of the sovereignty of a country will lie in the ownership of the data, understood as the information of each one of the transactions and actions of its society. If they can't exploit it, at least they can keep it.
Initiatives such as Gaia X, a Franco-German project for the development of an efficient and competitive, secure, and reliable data infrastructure for the European Union, may come to compete with the hegemony of Google, AWS Amazon, and the large Asian providers.
For geostrategic reasons, local companies will have a chance.
And undoubtedly another driver of the sector will be the financial capacity of the companies, the access to technology and the lobbying capacity.
We will see pressure from large companies to undertake acquisitions in all countries in order to provide global service to their clients or themselves.
We will see Chinese and American companies and large funds bet on a buildup of companies in a sector as strategic as data storage.
But there are also huge amounts of money in private European funds, Spanish, German, French, English, etc. that need to consolidate world players and will have content in Europe