Finland leads Europe in cloud service take-up

Europe is catching up with the US for cloud adoption - and the Nordic countries lead the way, with Sweden and Denmark close behind Finland

This article can also be found in the Premium Editorial Download: CW Nordics: CW Nordics – May 2015 Edition

It is a common perception that the adoption of cloud computing in Europe lags behind the US, but the tide now appears to be turning - and the Nordic countries are leading the way.

According to a December 2014 Eurostat study, Finland has the highest take-up of cloud services in Europe and other Nordic countries are close behind. The Eurostat survey – conducted with 150,000 companies in 28 countries – found 51% of Finnish companies uses cloud services, over double the EU average of 19%.

“We see Finland as one of the top countries in the adoption of cloud services,” said Leena Mäntysaari, research analyst at Gartner.

Nordic countries dominated the Eurostat survey. Sweden (39%) and Denmark (38%) take up the third and fourth highest percentages in cloud adoption respectively. The surprise entry is Italy, a country which hasn’t had an impressive track record in ICT surveys, squeezed between the Nordic countries with a cloud services adoption rate of 40%.

Italy is matched by non-EU Nordic state Iceland, which continues the region’s high adoption trend with 43% of Icelandic businesses using cloud services. With 28% cloud adoption, Norway is the lowest-ranked Nordic country, but still above the EU average.

The Eurostat figures highlighted differences in how businesses across Europe use cloud services. Finnish companies mainly use cloud services for email and file storage with office software, financial and accounting services and database hosting all coming close behind.

In Sweden, Denmark and Norway file storage stands out as the most popular use, while email and database hosting follow behind. 

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But Finland hasn’t always been a cloud leader. Petri Rouvinen, research director at the Research Institute for Finnish Economy (ETLA), said Finnish companies had a slow start in waking up to cloud services. He has researched the topic for Digibarometri (Digital Barometer), an annual study of the digital environment in Finland, which will be released later this month.

He said in 2010 cloud services in the US and Sweden were already a focal point of interest, but while interest in Finland was slow at first, it rapidly turned to wide cloud service adoption.

Mäntysaari agreed and said the growth in cloud services had been particularly strong in the last three years: “The major reason for this is the strong tradition of outsourcing in IT services,” she said. “Finnish companies are used to purchasing services from third parties and there aren’t high barriers for using third-party services.”

Pete Nieminen, CTO at the Nordic IT infrastructure provider Atea Finland, put cloud adaptation even higher than Eurostat: Around 75% in Finland, with an average of 40% in other Nordic countries. He said strong penetration of software as a service (SaaS) in Finland is one reason for the wide cloud adaptation.

“Currently SaaS penetration is over 90% in Finland,” said Nieminen. “Financial and HR applications are almost all cloud-based. Other Nordic countries are more balanced between SaaS, PaaS and IaaS.”

Although SaaS accounts for most of the Finnish cloud services market – something Mäntysaari’s fellow Gartner analyst Mika Rajamäki estimates is valued around €170m – other models are starting to gain momentum.

“In all the cloud services models combined the speed of annual market growth is around 20% in Finland, which is similar to the rest of the Europe,” says Rajamäki. “In IaaS, where the starting point is also lower, the growth is faster, around 40%.”

Rajamäki also points out that while SaaS applications are used by companies of all sizes, IaaS and PaaS are still mainly purchased by larger companies.

Ongoing challenges

Cloud service adoption may be reaching maturity in the Nordic countries, but challenges remain. Security concerns and the lack of expertise are widely reported as the main issues hindering even greater cloud services adoption.

Despite being the leader, this is true for Finland as well. According to Eurostat, 40% of companies which haven’t implemented cloud services still see insufficient knowledge as the main obstacle for their adoption. In addition, the risk of security breaches and uncertainty over the location of data are both mentioned by nearly a third of the surveyed companies. 

Nieminen noticed that privacy laws and regulations are very important for Finnish companies: “Other Nordic countries are not that obsessed over regulations or locality. Public cloud is more popular in other countries and Finns would prefer to have local private cloud – even if the price is more expensive and the usability and availability lower.”

When Eurostat polled Finnish companies already using cloud services, high costs were mentioned, as often as security matters, as an issue with cloud service adoption.

“In our studies, data security has been a major worry for companies but its role is getting smaller. Those who have experience with cloud services have noticed it’s less of a worry than they thought,” said Mäntysaari. 

“Still there aren’t yet many SaaS applications for core business operations like enterprise resource planning (ERP). The closer to the heart of a business you get, the more careful companies are.”

Towards more tailored systems

While Digibarometri sees the rapid adoption of cloud services as a positive development, it also raises questions about its depth. Finnish companies may be active in using cloud services as a platform for traditional services such as email, but what is still broadly missing is using cloud to build new digital business models and customer-specific services.

“For example, in my view Finland isn’t ahead of Sweden when we talk about new business models built on cloud services and new ways to serve users but, unfortunately, Eurostat – or any other survey – doesn’t really dig into this,” said ETLA’s Rouvinen.

But a turning point may be approaching. Mika Rajamäki believed that the "trial period" in cloud services is coming to an end and the market is moving towards more strategic use of the cloud. He argues that Finnish companies are not only planning cloud strategies, but are ready to invest more in them.

“IaaS is starting to go deeper into the core of Finnish companies,” said Rajamäki. “When currently IaaS is mainly purchased on private cloud, companies will start to buy more public cloud IaaS and to some extent PaaS, and public cloud vendors like AWS and Microsoft will grow as a procurement channels.”

Deeper adoption of different cloud models is still only one part of the future. The trend is moving towards industry specific cloud services. Instead of offering the same standard service to everybody, new cloud services will be created to meet the requirements of a specific industry.

Rajamäki and Mäntysaari agreed cloud services will play a vital role in enabling the digitalisation of business in Finland and abroad.

“In around five years' time, cloud services will have become business as usual,” concluded Rajamäki. “We’ll look back and wonder how things were done before the cloud.”

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