Monday, October 23, 2017

The cloud of unknowing. Brexit and online businesses

by Susan Bowen, VP & GM, EMEA, Cogeco Peer 1

Susan Bowen, VP & GM, EMEA, Cogeco Peer 1 believes that despite the uncertainty surrounding Brexit, online businesses could benefit if they understand that it also provides an opportunity to reset their market positioning.

Brexit has created a cloud of uncertainty over the UK and the burning question for online businesses is what difference will it make? Despite the confusion and concerns, there is a singular, inescapable fact: the European Union is the UK’s largest trading partner.

According to the community of online multichannel sellers, Volo, more than 50% of the UK export market for online businesses is destined for Western Europe. The EU is a huge market on the UK’s doorstep, and although the trading opportunities are appreciated, the size of the market hasn’t been fully recognised until now.

Therefore, as the UK embarks on negotiations around Brexit, inevitably there will be changes in rules and regulations and businesses will need to be agile to stay ahead. Goods may attract local VAT and import duties depending on how any trade agreements are set up.

At the moment, British firms do not pay import duties on goods exported to Europe but this could be set to change. Online businesses could also be faced with additional administration costs as well as customs clearance charges, which could have an impact on orders.

For the data economy, this is a particularly complex time. Much has been made of the fact that the EU has a multitude of regulations that governs the way countries trade with one another.

Weights and measures, the shape of bananas, environmental impact and supply chain management have all been cited as being areas where the EU has imposed a strigent set of rules. As we move on to form new relationships with each of the 27 members of the EU, data infratstucture is likely to be an area for legislative concern.

Security, data storage and format will all need to be considered. Everything from maps, weather reports, and financial transactions, to personal records will need to be considered as part of the negotiations.


Uncertain supply and demand

In short, it’s going to be difficult to predict supply and demand and even more so with the current currency fluctuations. For instance, companies that source goods from Western Europe are going to pay a higher price. The flip side is that the weakening of the pound will make some expensive and sought-after products more attractive to international buyers.

Online businesses could also see a boost in sales overseas as a result of the weaker pound, which can help cope with additional costs.

Powering this economic activity is a data infrastructure, itself underpinned by technology and services including colocation, network connectivity, hosting, and cloud, which provide the foundations for the digital economy and online businesses.

As such, it is incumbent on companies that provide these services, such as ourselves,  to recognise the current state of uncertainty for online businesses and provide the choice, flexibility and expertise to enable digital businesses to navigate these changes.


Bullet proof 

Flexible contracts can make a big difference to how an online business can operate. Good service level agreements (SLAs) provide the freedom to scale at will and make the most of business opportunities as they arise.

The impact of Brexit will lead to different opportunities to sell into Europe following currency devaluations. At the same time, it could mean scaling down operations as part of a belt tightening operation with the ability to scale back up when required.

Cloud, network connectivity and managed service providers who can distribute data across various geographical locations are also going to become more popular; especially as Brexit is going to have implications for new compliance requirements, such as the EU’s General Data Protection Regulation (GDPR), which comes into effect in May 2018.

Providers that are able to offer choice and flexibility combined with technical expertise will be key to helping digital businesses adapt and adopt new technologies, such as software defined WAN (SDWan), a key enabler for nimble data infrastructure, improved security and more efficient network provisioning.


Ruinous implications 

If the UK does not reform its law by the time it leaves the EU and retains the Data Protection Act 1998, it will likely be deemed by the EU as a destination providing inadequate protection for personal data. This means that the UK would not be able to receive or import any personal data from the EU.

Clearly this has ruinous implications for UK online businesses that trade with Europe. However, by hosting data in Europe, or elsewhere outside of the UK, these businesses will be able to address this without being caught up in the legislator’s crossfire.

Ideally, a cloud, network connectivity or managed service provider will have a high-performance network with locations and points of presence across Europe. This ensures that UK businesses can have top network performance levels irrespective of where their data sits.


Disruption and opportunity

Industry analysts unsurprisingly see Brexit as a major disruptive trend but, that said, it can also be a catalyst and an opportunity for UK businesses to reset their global competitive positions, and to rethink priorities and partnerships.

Brexit also offers the potential for some degree of freedom from existing regulatory or pricing constraints, and this can be viewed as an opportunity too.

We already have a borderless society in the world of the Internet. Technologies such as virtualisation mean that data stored within the EU is often backed up across multiple geographies via SD-Wan technologies. In addition to offering protection against malware, SD-Wan makes transporting data much more efficient and effective.

The fact that these technologies are already in place, with a proven track record, will offer some reassurance to business that the impact of Brexit will be minimised.

Cloud and network service providers can play an important role if they understand how different country regulations affect business and, following Brexit, how prices and sales for UK online businesses will likely be impacted.

Online and digital businesses have an opportunity to review and streamline their operations and should seek technology partners able to help them construct a flexible data infrastructure to help them meet the changes they will face and take advantage of the opportunities they open up.