How can Europe win the race for cloud innovation?

As the digital economy continues to evolve with a number of emerging technologies, notably AI, European leaders face a new challenge: How to foster an innovative ecosystem of domestic cloud champions that have the solutions and scale to compete with and reduce reliance on foreign providers. European policymakers, regulators, researchers, and industry leaders are focused on determining how Europe can improve its position in the race for cloud innovation, while maintaining control, autonomy, and confidentiality over European data that could be stored, processed, and accessed in other markets. 

In finding the answer to this, cloud sovereignty has become an ever more pressing issue. Looking at the current market, it’s easy to understand why. Nearly three-quarters (72%) of cloud services are provided by AWS, Microsoft Azure and Google Cloud in Europe, and up to 90% of European data resides outside EU-controlled infrastructure – creating serious geopolitical and jurisdictional challenges for the EU, and making issues like European data control, confidentiality, and accessibility ever more critical. 

Demand for sovereign cloud on the rise in the zettabyte era 

Striking a careful balance between cloud innovation and data control is becoming increasingly critical. IDC expects 213,557EB of data will be generated in 2025 and will more than double to 527,469EB generated in 2029, underpinning the growing need for robust sovereign data infrastructures.1 

In this context, it is clear why there is an increasing demand for sovereign cloud in Europe. IDC has predicted that global spending on sovereign cloud solutions will reach nearly USD $258.5bn by 2027, driven by market demand as well as laws and regulations that include the General Data Protection Regulation (GDPR), Digital Operational Resilience Act (DORA) and the Data Act. These laws do not prohibit data transfers, but place such obligations around data protection, supply chain, security controls and risk management that they tilt the balance towards a stronger emphasis for sovereignty and localisation, especially in the current geopolitical environment. 

One example comes from Germany-based cloud services provider (CSP), Arvato Systems, which deployed a sovereign infrastructure in Europe to support COVID-related public health workflows. This project highlights that sovereignty is both a vision for European leaders, and a viable solution in highly sensitive scenarios. 

Scaling Europe’s digital infrastructure in an AI world  

The rapid acceleration of AI provides European-based CSPs the opportunity to respond to  the growing need among domestic enterprises for sovereign cloud infrastructures even further, with these enterprises increasingly prioritising data privacy, security, and control.  

As with cloud services generally, similar concerns are emerging around legal jurisdiction and transparency with respect to AI, particularly how AI models are trained and what data they use. There is growing recognition across Europe that AI systems must not only comply with the existing legal framework on data protection, cybersecurity and AI  but also reflect the core values of the continent, such as privacy, accountability, and human oversight. This has created an urgent need for sovereign AI solutions developed within European legal and ethical frameworks, ensuring that European data is not only protected, but also used responsibly and in the public interest. 

One way European organisations are looking to capitalise on the capabilities of AI without sacrificing sovereignty requirements is with unified private cloud platforms. Large Language Models (LLMs) can be set up securely in a private cloud, and ready-made AI apps can be deployed to help them take advantage of AI while retaining full jurisdictional control of their enterprises’ data. 

Looking towards a sovereign future 

What’s clear is that cloud sovereignty is integral to Europe’s digital future and central to conversations among policymakers, regulators, and industry leaders, as they strive to build a more trusted, interoperable, and resilient digital economy. There is unlikely to be a single solution, but instead a variety of cloud models with different degrees of sovereignty, dependent on the sector, the requirements, and type of data being stored, managed, and accessed. Innovative CSPs and organizations that can develop, deploy, and scale such models, whether public or private, will be well-positioned to provide and profit from offering fully local competitive alternatives.