Europe's Software Problem

This article is part of a series on (European) innovation and capabilities.

Europe’s communication needs are currently almost exclusively delivered by Chinese hardware that connects us to US-based platforms. For a variety of reasons, this is not a good idea.

As stated recently by Charles Michel, President of the European Council, “Interdependence is natural, even desirable. Over-dependence, however, is not”.

At the core, the problem is that almost no consumer-oriented platforms or software products are being created in Europe, or more precisely, by European companies.

Almost all software and (communication) services these days are provided (nearly) for free. The software comes with your computer, the service comes with the phone, or perhaps it is an app that costs a few euros at most.

There are of course exceptions, gaming is one, but in general software and services aimed at consumers are made available without explicit payment. This includes browsers and almost all our modes of communication (email, chat, video) or collaboration (file exchange, calendaring, document editing).

So why would anyone develop such free platforms? Programmers and hardware are still pretty expensive. There must be a plan.

In many countries there is a deeply held belief that it will always be possible to eventually exploit users in order to make money, even if you currently aren’t yet sure how you’ll do that.

Possibilities include monetizing users’ behaviour, or more nefariously, once a platform is dominant, abuse its position to make other people pay up if they want to do business with your users (or simply reach them). This is called rent-seeking.

As an example, Apple and Google have recently booted a large gaming company from their platform to make sure they get their 30% cut. To access Android and Apple users, you’ll have to get out your wallet.

Over the past two decades, giving away free software (or running it for users as a platform) has proven to be profitable in the long run, mostly by extracting money indirectly, often through unkind or exclusionary means.

Enter Europe

European companies generally do not operate like this. For one, we lack the imagination and vision to launch something without knowing how it might eventually make money. This may be good or bad depending how you look at it.

European investors specifically are much more interested in traditional business plans than US venture capitalists. “Data is the new oil” does not translate well into German, French or Spanish.

In addition, with the GDPR, NIS (2) Directive & other regulations, data in Europe is definitely more “the new toxic waste”. It is in any case not a business plan.

So not only do we lack the imagination to launch free platforms, the path to one day making money with them is blocked by regulation.

The result

Europe gets its “free” services from the US (and the hardware from China), and both of these countries now operate our consumer communication platforms.

In addition, US companies have taken the economies of scale from consumer communications and have turned these into highly affordable business communication tooling as well (G-suite/Google Workplace, Office 365, Teams).

For various reasons, handing over the vast majority of your communications to people far away is a bad idea. Notably Chinese and US laws offer no meaningful privacy protections for European citizens.

Attempted solutions

Through various kinds of regulations it has been attempted to make transferring data to countries with inadequate privacy regimes illegal. Both in theory and practice this has not worked. US stuff simply is more inviting to use - as it should be, money is being made by us using it.

In earlier times, software (and communications) were far more interoperable than today. This made it possible for projects from different countries and companies to interoperate, which allowed for some competition. You could at least attempt to (re)join the party. Try “interoperating” with WhatsApp one day.

Around 2007, telecommunications companies made one last attempt to take this standards based world to the Internet. The functionalities now delivered by WhatsApp, WeChat, iMessage etc were packaged up in the “Rich Communication Services” protocol suite, also known as Joyn.

When launched in 2007 however, such standardised communications turned out not to be competitive with free services (for many reasons, including regulatory). So all communications are now on proprietary or exclusionary platforms – it is for example getting hard to deliver email from your own mail infrastructure without ending up in a spam folder over at Gmail.

So in effect, outlawing selling our data to the US has not worked, and neither has a program of going for interoperable standards based communications – the results simply aren’t compelling enough.

Something big will have to happen before we’ll be able to compete with “free” platforms from other countries.

The inevitable solution

If Europe wants to have its citizens (and companies) rely significantly on European-operated software, it has no choice but to develop better software, and to also offer that for free. The good news is: we have the talent. Tens of thousands of Europeans work for US tech companies, often from Europe even.

Another problem we should not have is funding.

The amounts of money involved in software development are trivial on an EU-wide scale. The EU spends several billions every year on worthy infrastructure projects like Copernicus (Climate satellites) and navigation (Galileo). Hundreds of billions are spent on research.

There is definitely enough money to author things like a web browser, chat, email and video conferencing facilities. This would only require the equivalent of a few days of Corona recovery fund money. It will still cost real money though – we don’t need “government-grade” or typical clunky open source software, we need very compelling apps and services that can compete on quality.

It is amazing what a billion euros could get you, with only a two-euro tax on every EU citizen! But it would deliver great things – free communication platforms that we do run ourselves, and that do not track our citizens for the benefit of foreign companies and advertisers.

Note that such solutions might well be open source, and are almost guaranteed to be built on top of existing open source products. I love open source, but I am also keenly aware of the feature gap that exists between many open source products and what modern consumers and enterprises expect in terms of useability and manageability. But I’d love to open a pull request on the “EUmail” system!

The remaining challenge

Although the money can definitely be found, it is not easy for any government to support/fund innovative projects, specifically software. Public procurement is a terrible way to spend money. Otherwise useful programs like Horizon Europe are also not set up to deliver this. Consumer-facing software needs to change at a rapid clip, with several major releases every year. Current government procurement for billion euro projects would be happy to buy anything at all in a three year timeframe. H2020 funding also does not work well if you want to be dynamic about your goals.

With enough political will however, it should be possible to find structures to fund European programmers to write compelling software for Europeans. Some of the recent Corona App programs may prove instructive. This might also involve things like contests or other non-traditional constructions.

In this context I am particularly fond of the German Federal agency for disruptive innovation, SPRIND (“A home for people with radical new ideas”), headed by my friend Rafael Laguna.

But it won’t be easy - stimulating innovation with money is extremely hard. Chances are you’ll only be stimulating existing big companies, who might not even be European.

Summarising

Europe nearly exclusively communicates through US platforms, using Chinese hardware. Interdependence is good, but this is over-dependence.

The world is dominated by “free” software and platforms, for which we pay by other means (like rent-seeking and surveillance). European software companies can’t (and won’t) fund themselves this way. Our attempt to forbid foreign software from funding itself with data is worthy, but has failed to foster attractive European software.

Since all communication platforms are now free, the only way to get people to use competitive European software and services is to also offer these for free, and to make sure this technology is very good and compelling. A very minor EU contribution could pay for all this.

The remaining non-trivial challenge is how to turn such EU funding into quality software – existing mechanisms like public procurement and Horizon Europe are not up to the job.

This article is part of a series on (European) innovation and capabilities.