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September 21, 2021

Is Europe’s OVHcloud ready to take on the US cloud hyperscalers?

A mooted €400m IPO could give Europe's largest cloud provider the resources to expand its reach, but it will still struggle to match the scale of its US rivals.

By Matthew Gooding

Europe’s largest cloud computing provider, OVHcloud, has confirmed plans to IPO on the French stock market in a move that could help it raise more than €400m. While the company is keen to expand its reach around the world, it faces an uphill struggle to grab a larger slice of a market which is dominated by its US-based rivals.

OVHcloud IPO

OVHcloud hopes to raise €400m at an IPO later this year. (Photo by T. Schneider/Shutterstock)

OVHcloud released its IPO registration document on Monday, which paves the way for a listing on Paris’s Euronext market. CEO Michel Paulin said: “With the planned IPO, we want to consolidate our position as the leading pure play European cloud champion, by developing key customer segments in our main geographic markets, broadening our addressable markets through an advanced level of innovation, and expanding in and outside Europe, particularly in North America and Asia.”

The registration document does not set out any timescales on the IPO, though Paulin said in an interview on Tuesday that he expects it to happen before the end of the year. The company hopes to raise about €400m, or $469m when it lists, and a report in the Wall Street Journal on Sunday suggested OVHcloud is expected to be valued at about $4.7bn.

What is OVHcloud and where does it stand in the cloud market?

OVHcloud was founded in 1999 by the Klaba family and is based in Roubaix in northern France. It is Europe’s largest cloud provider and offers both private and public cloud products, as well as industry-specific platforms. It has 1.6m customers around the world, and those listed on its website include job portal Talent and games company Ravensburger. Its 2020 revenue was €632m, up from €600m in 2019, and in the IPO document, the company states it has been growing at a rate of 20% a year for the last decade.

However, its overall share of the European cloud market remains tiny, with the big US trio Amazon’s AWS, Microsoft Azure and Google Cloud maintaining a dominant position. Native European cloud providers have seen their share of the market decline rapidly in recent years, according to figures from Synergy Research Group.

Synergy has just finished compiling its European cloud market data for Q2 2021, and John Dinsdale, the company’s chief analyst and research director, says: “Amazon, Microsoft and Google have all continued to grow their market share in Europe. Collectively they now account for 69% of European cloud revenues.

“OVHcloud has not been losing market share but it is stuck at around 2%.”

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OVHcloud IPO: what impact will it have?

With this in mind, it is no surprise OVHcloud is looking to other territories for growth. The IPO document states that it “intends to increase its footprint in Asia and Australia, where it already operates three data centres.” The company “is also contemplating
expansion opportunities in India, Indonesia, Japan, South Korea and Thailand, which are high potential markets,” it says.

€400m may sound like a big number, but if you put it into the context of the big three cloud providers then it is like pocket change.
John Dinsdale, Synergy Research Group

The proceeds of the IPO could also be used to fund acquisitions to broaden its product offering. But Dinsdale says OVHcloud needs to be realistic about what it can achieve with the budget at its disposal. “€400m may sound like a big number, but if you put it into the context of the big three cloud providers then it is like pocket change,” he says. “At the moment Amazon, Microsoft and Google together are investing $27bn in CapEx every quarter, with the largest part of that investment going into growing and updating their data centre networks.”

OVHcloud has long been championed by the French government as a possible European competitor to the US hyperscalers. Becoming digitally sovereign is a priority for the European Union, and building native cloud capabilities is a key part of this. The emerging GAIA-X framework aims to create a set of standards for cloud companies around storing and processing data, and OVHcloud was one of the first companies to sign up and agree to abide by the standards.

However, Dinsdale believes it is wishful thinking to suggest that OVHcloud or another European provider can emerge to challenge the might of AWS, Azure and Google Cloud. “It is at least ten years too late to be talking about developing a true European challenger to AWS and Azure,” he says. “Had that discussion happened, and for it to be meaningful, it would have to have been driven by long-sighted and deep-pocketed industrialists, and not by politicians. The battle for cloud leadership is already over and there wasn’t a European contender.”

But, he adds, “a company like OVHcloud can still prosper and grow, but it has to remain targeted at specific market niches, applications and use cases.”

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