In the past decade, cloud computing has become the dominant paradigm for acquiring IT infrastructure for companies. Amazon established the market for on-demand computing power, storage, and transmission capacity with Amazon Web Services (AWS). Google and Microsoft quickly followed, forming the oligopoly we know today.

From the beginning, regional IT infrastructure companies that wanted to enter and participate in the new cloud computing market faced significant challenges. Becoming a cloud provider requires scaling, vast amounts of capital, and the ability to absorb the risks of underutilized infrastructure.

We are convinced that governments play a crucial role in lowering market entry barriers — through market design based on enhanced competition and a level playing field.

Supportive Policies to Enhance Regional Resilience and Competitiveness

This approach has proven effective in the energy market: Government intervention — introducing a European market design — has promoted the development of renewable energy sources and supported competition in power generation, allowing citizens to participate with their own power generation capacity (e.g., rooftop PV). By creating a supportive environment for regional cloud services, governments can promote sustainable regional digitization and improve the competitiveness of the local digital economy.

A successful digital economy can stand out from global competition by using regional and sustainable resources that reflect local values and have a lower environmental impact.

Ultimately, it is the regional IT experts and service or infrastructure providers who are the real drivers of digitization. These regional IT service providers are eager to offer services tailored to the specific needs of local businesses.

One of the challenges for local IT infrastructure providers in the current market is competing with the practices of global digital service companies to attract customers. These global companies can access large amounts of capital and have the possibility to sacrifice cash flow for one to two years to secure customer loyalty. Tech startups as well as SMEs often receive considerable annual support from international cloud providers in the form of credits for using their digital resources and managed services.

For instance, Google offers up to $200,000 ($350,000 for AI startups) in credits over 2 years, along with access to startup experts, technical training, and business support. AWS similarly offers up to $100,000 in AWS credits as well as exclusive partner offers valued at up to $800,000. Microsoft offers up to $150,000 in Azure credits and free access to tools like GitHub and Microsoft 365. Regional IT service providers cannot match these conditions — even if their services are superior.

Governments can play a key role in addressing this inequality and promoting fair market conditions. This can be achieved through improved market design that includes:

• Setting up funding programs for startups and regional businesses to purchase regional cloud infrastructure

• Promoting the development of shared local digital infrastructure through grants or public infrastructure development

• Introducing regulations that prohibit direct support from international corporations to ensure fair competition

By fostering a strong regional IT sector, the government can ensure that a larger portion of value creation remains in the region. This creates more jobs, increases tax revenues, and promotes a healthier, more competitive market environment.

Promoting Sustainable and Socially Responsible IT Practices

Governments should prioritize the development of digital infrastructure focused on regional needs. Most of the environmental impact in the digital sector occurs during the manufacture of IT equipment — including servers, network equipment, and storage systems. This equipment is typically renewed every 3–5 years. Regional IT providers can play a key role by extending the lifecycle of IT equipment, thus reducing its environmental impact. Additionally, regional cloud providers are more likely to prioritize sustainable and socially responsible practices due to their close connections with local communities.

Models like the Doughnut Economics, as implemented in Amsterdam, are good examples of how regions can become more sustainable. A strong regional IT sector can further promote the vision of sustainability by leveraging regional resources and infrastructure. Furthermore, the government could promote the standardization of labeling for sustainable regional digital companies. This would allow them to distinguish themselves through their environmental management and social responsibility from international providers.

Strengthening Knowledge and Collaboration in Public Administration

To further empower regional cloud providers and promote a strong regional digital economy, knowledge and expertise in the administrative sphere are necessary. Building expertise among public servants about the digital and IT economy is essential. This includes creating educational opportunities for public servants to understand the digital value chain, business models, and competitive conditions of the IT sector. Additionally, promoting exchanges between regional IT experts, administration, and policymakers through events and discussions fosters mutual understanding and collaboration.

The active involvement of regional IT experts in developing digital strategies aligned with regional, climatic, and economic goals ensures that these strategies are well-informed and locally relevant.

By strengthening knowledge and collaboration in public administration, governments can create a more supportive environment for regional cloud providers and ensure they have the resources and understanding to thrive in this highly concentrated digital market.

This article is part of our work on the project “Cloud of Amsterdam", funded by the province of North Holland.