What does IPCEI CIS tell us about the future of edge and cloud in Europe?

What is IPCEI CIS?

IPCEI – CIS is an EU funding vehicle to support research, development and deployment of advanced edge and cloud technologies across Europe. IPCEI CIS stands for “Important Project of Common European Interest: Next Generation Cloud Infrastructure and Services.”

19 direct participants and a further 90 ecosystem partners are leading projects to develop new products and services across the edge value chain (or edge-cloud continuum). The reasons given for choosing these specific partners focus on interoperability, sustainability and cybersecurity. These companies are being supported with €1.2 billion in direct state contribution which is expected to unlock an additional €1.4 billion in private investment.

Which companies are benefiting from IPCEI CIS funding?

The project is split into four workstreams, which loosely align with layers of the value chain. Figure 1 shows the direct partners of IPCEI CIS, organised by the workstream that they are involved with. As more detail emerges about the workstreams it is possible that partners like  Orange, TIM and SAP may also have responsibilities in delivering in the infrastructure segment (WS1).

Figure 1: The IPCEI CIS direct partner ecosystem

The information that the direct partners have disclosed about their IPCEI CIS projects to date indicates that the mandate for this core group is to produce industry-agnostic infrastructure, platforms, tools and services that are highly interoperable. But, in the broader ecosystem of indirect partners there is focus on the development of vertical applications. For example, Airbus’s Axis project plans to connect aircraft as “flying edge devices,” and Elevait’s AIDED project to develop an AI-ready distributed cloud for public sector administration.

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What are the possible impacts of IPCEI CIS?

Telcos and other players may emerge as meaningful competitors to hyperscalers in the sovereign cloud market

Today, American hyperscale cloud providers – Google, AWS, Microsoft Azure and Oracle – dominate the European cloud market. The European Commission itself uses the sovereign cloud products offered by Oracle and AWS. The market dominance of this small group impacts end-users’ choice of services. IPCEI CIS is fostering local competition to ensure digital sovereignty of European data, encourage sustainable infrastructure, and keep prices down by funding projects of regional cloud providers – Telefonica, SAP, Deutsche Telekom, TIM, and Orange. For example, Orange’s IPCEI CIS project seeks to develop an open-source telco cloud stack to create “energy-efficient cloud services that align with European values and environmental goals,” and SAP’s Open Reference Architecture project seeks to lay the foundations for a multiple provider cloud-edge continuum. While it will be difficult to break the hyperscalers’ dominance in public cloud, regional cloud providers could meaningfully differentiate on data sovereignty and security. As the volume of highly sensitive data hosted in the cloud continues to increase, this could drive market share for regional players.

Interoperability will increase the edge market opportunity across Europe

Edge is a more nascent market than cloud and the value chain is still in flux. Telcos have a right-to-play here because of their distributed footprint across markets and their existing networks but few in Europe have leveraged this position (with the exceptions of Telefonica and Vodafone). IPCEI CIS funded projects should provide the impetus for telcos who have been hesitant to deploy network edge infrastructure at scale (notably Orange, Deutsche Telekom and Telecom Italia) to do so. A pan-European network of edge nodes is essential to meet the demands of enterprises – that edge services are interoperable and scalable – and capture growing edge market revenues. Deutsche Telekom’s EdgeConnect IPCEI CIS project aims to establish a full-service stack for providing sovereign and open edge and cloud services and TIM’s Edge and Cloud Contiuum project has similar aims.

STL Partners predicts that edge computing revenues in Europe and Central Asia will reach $130 billion by 2030 with $30 billion attributable to network edge infrastructure. But telcos have competition for those revenues from hyperscalers, who have moved their data acquisition point closer to end-users, and from data centre players, like AtlasEdge and nLighten, who have been pursuing regional expansion strategies. All these players are looking to secure their position in the value chain, which requires developing a robust commercial strategy for edge computing.

Revenues from AI applications will scale more quickly due to focus on SME inclusion and open-source

One of the European Commission’s digital decade targets is for “75% of EU companies to use Cloud, AI or Big Data” by 2030. For AI in particular, the combined use of edge and cloud compute enables optimum performance with lower costs and carbon impact than using only hyperscale cloud services. In the edge-cloud model, data preprocessing and real-time model inferencing should happen at the edge while model training and access to AI frameworks is provided in the cloud. One IPCEI CIS project targeting this is E-group Software’s FedEU.ai project to decouple data processing and insights generation, to reduce the environmental impact of AI and improve data security. Such investments in new infrastructure to support AI workloads is essential as they are more power intensive and costly to run than other application workloads. Large enterprises can fund this themselves, but the long tail of SMEs will need affordable shared infrastructure, like that funded by ICPEI CIS, to adopt AI applications.

Beyond better infrastructure for these technologies, increasing the accessibility of next-generation technologies for smaller regional enterprises also appears to be a priority for the European Commission. For example, IPCEI CIS is providing funding for Tiscali’s Villanova project which aims to build a GenAI model that is tailored to European languages and has a user-friendly open-source interface, to make it easier for resource-constrained small businesses to access GenAI.

Ecosystem players with best-in-class security and sustainability capabilities will perform strongly in the market

Growing public concern to reduce the carbon impact of digitalisation and reinforce the EU’s digital borders has led to a legislative push from the EU and its member states to improve digital security and sustainability. An example of this is the EU digital decade target to “deploy 10,000 climate-neutral highly secure edge nodes” by 2030. Providing IPCEI CIS funding for projects that demonstrate their impact on the sustainability and security capabilities of edge and cloud solutions is another tool used to achieve the same goal. Together, the legislative and financial incentives to promote security and sustainability in the edge and cloud ecosystem will create a ‘do or die’ scenario for ecosystem players. Those with the most innovative solutions will capture an outsized share of revenues in Europe and will have the first-mover advantage in other geographies who have been slower to legislate on these topics.

On the sustainability theme, IPCEI CIS is funding WestfalenWIND IT’s SDEC project to establish a model for operating edge data centres inside wind turbines and IONOS’s project to create compact and energy-efficient edge and cloud hardware. 4iG’s Digital Trust Services project is an example of a IPCEI CIS project focused on security across the cloud and edge value chain.

STL’s experience in edge and cloud

STL Partners has undertaken 100+ engagements with clients across the edge value chain to develop their commercial strategy for edge and cloud computing. We have an industry leading practice, providing market insights. If you are looking for support, or are interested to hear more, check out our edge computing hub, or book a call with one of the edge team here.

Anna Boyle


Anna Boyle

Senior Consultant

Anna Boyle is a Senior Consultant at STL Partners. She has supported Tier-1 telecoms operators with their edge computing and 5G strategies. Anna sits in STL’s Edge Practice covering topics including the global edge computing market, investment trends and adoption of enterprise and consumer edge computing applications.

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