France and Germany join forces on cloud technology to challenge Amazon and Alibaba

France is joining a European cloud project initiated by Germany as both governments strive to give their companies an alternative to storing data with U.S. or Asian rivals such as Amazon.com Inc. or Alibaba Group Holding Ltd.

The European Union’s two leading powers will work together to build a “secure data infrastructure,” they said in a joint statement released Tuesday. They are embarking on talks to work out how to structure the service by the end of the year and will liaise with European companies and other potential partners, according to the statement.

The move comes as Amazon’s AWS is racing for dominance in Europe and Alibaba is pushing to enter the market. Domestic competitors by comparison are struggling to gain critical mass. The use of cloud services is expanding rapidly and the technology will soon provide the architecture for everything from health care services to mining financial data.

Europe needs its own cloud infrastructure to ensure confidential data doesn’t leave the region, Tim Hoettges, chief executive officer of Deutsche Telekom AG, Europe’s most valuable telecom company, said Tuesday at a tech conference in Cologne.

U.S. players have been making huge investments to stay ahead of the game in cloud services. Alphabet Inc. has signaled it’s ready to dent its earnings to invest in the cloud, while Microsoft Corp. is likely to get a boost from the $10 billion contract it won to run the Pentagon’s cloud.

Specialists from companies including SAP SE, Deutsche Telekom and Deutsche Bank AG have worked on the project, according to a strategy paper produced by the German Economy Ministry. Officials in Paris are still to release details of any French companies involved.

Microsoft said that it’s legitimate for Europe to seek greater digital sovereignty, but it’s a mistake to focus on where providers are based.

“Real sovereignty requires the most powerful cloud solutions — otherwise Europe will only cement its digital gap,” a Microsoft spokesperson said Tuesday in an emailed response to questions. “We believe that as a hyperscaler, we could make an important contribution.”

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France and Germany join forces on cloud technology to challenge Amazon and Alibaba