Why European technology is a competitiveness question, not a sovereignty one

Most writing about European technology, including some of ours, leads with sovereignty: the US CLOUD Act, foreign jurisdiction, where the data physically sits. That argument is real — we set it out in detail — but it is defensive, it is narrow, and it only interests organisations that already have a compliance problem.

The larger argument is that Europe has to build technology companies that win, and that enterprise buyers decide whether that happens.

What the Draghi report found

In September 2024 Mario Draghi published The future of European competitiveness, commissioned by the European Commission. Its diagnosis of the technology sector is blunter than most European policy writing, and it is worth quoting rather than summarising.

On where the gap comes from:

Europe largely missed out on the digital revolution led by the internet and the productivity gains it brought: in fact, the productivity gap between the EU and the US is largely explained by the tech sector. The EU is weak in the emerging technologies that will drive future growth. Only four of the world’s top 50 tech companies are European.

— The future of European competitiveness, Part A, p. 5

On the absence of new companies:

There is no EU company with a market capitalisation over EUR 100 billion that has been set up from scratch in the last fifty years, while all six US companies with a valuation above EUR 1 trillion have been created in this period.

This lack of dynamism is self-fulfilling.

— Ibid., p. 6

And on what happens to the European companies that do succeed:

Innovation is blocked at the next stage: we are failing to translate innovation into commercialisation, and innovative companies that want to scale up in Europe are hindered at every stage by inconsistent and restrictive regulations.

— Ibid., p. 6

Between 2008 and 2021, the report records, close to 30% of the unicorns founded in Europe relocated their headquarters abroad, the vast majority to the United States. The pattern it names for all of this is the middle technology trap (p. 28): strong in mature industries, weak in the ones that produce growth, with investment following the same groove. Europe’s top three R&D spenders have been automotive companies for twenty years; in the United States the top three are all in technology.

Draghi does not treat this as a matter of values or protection. He treats it as arithmetic, calls it “an existential challenge” (p. 5), and is direct about the remedy: “the only way to become more productive is for Europe to radically change.”

The number that should concern a CIO

One figure in the report says more about enterprise procurement than anything else in it.

Around 70% of foundational AI models have been developed in the US since 2017 and just three US “hyperscalers” account for over 65% of the global as well as of the European cloud market. The largest European cloud operator accounts for just 2% of the EU market.

— Ibid., p. 24

Two per cent of its own home market. That is not an engineering verdict. Nobody ran a bake-off and concluded that European infrastructure companies were thirty times worse. It is the accumulated result of tens of thousands of procurement decisions in which a European option was never seriously on the shortlist.

The report is honest that some of this is not recoverable:

While some digital sectors are likely already “lost”, Europe still has an opportunity to capitalise on future waves of digital innovation.

— Ibid., p. 24

Which is the useful part. Hyperscale infrastructure is largely decided. Service management, project and portfolio tooling, CRM, collaboration, applied AI — the layer where most enterprise software money actually goes — is not decided, and those decisions are being made this quarter, in evaluations that most organisations run on autopilot.

Where buyers come into it

Here is the part that rarely gets said out loud in a vendor selection.

European software companies do not usually fail for lack of engineering. Mistral builds competitive models. Clever Cloud runs production infrastructure properly. There are capable European products in most enterprise categories, and the ones that are not yet capable are usually not capable because they are small.

Scale is the constraint, and scale is decided by buyers. A vendor that cannot win enterprise accounts in its own continent never reaches the revenue that funds the roadmap that would make it credible against an incumbent. Draghi’s 2% is what that looks like after twenty years of defaults.

That is not a moral argument. It is a description of how markets allocate capability — and it is the one lever in the report that does not require a Council decision.

It is also the lever that is actually moving. The European Policy Innovation Council tracks delivery against the report in its Draghi Implementation Index; its latest update counts 60 of the 383 recommendations — 15.7% — fully implemented in binding EU law, and 158 (41.3%) at least partially. The rate is falling rather than rising: the combined index gained 2.4 points since January, against 7.5 points in the cycle before, and what does get done clusters where competitiveness overlaps with security.

Note which areas lag. Energy, semiconductors, governance — and digitalisation, held up by regulatory complexity and political sensitivity. The recommendations closest to the subject of this guide are among the least delivered, nearly two years in. EPIC’s own proposal is a European Competitiveness Act with a public scoreboard and a binding adoption calendar, which tells you how little of this is currently tracked at all.

So the policy route to a competitive European technology sector is the slowest-moving part of a slowing programme. The Competitiveness Compass has to clear legislatures and national sensitivities. A shortlist has to clear a procurement committee, and you chair it.

What this changes in practice

Less than you would think, and that is the point: the change is in the default, not in the rigour.

The discipline stays. Our assessments are not all favourable: one says not yet, one says the popular answer does not actually solve the problem, and one assesses our own product with that conflict stated on it. A list where everything is recommended is a list nobody should trust.

The honest tension

There is a real tension between this argument and the advice we give clients, and it is better named than hidden.

Our job is to tell a client the truth about their programme, which sometimes means recommending the American product because it is the better fit today. We do that, and we will keep doing it. A consultancy that steers clients toward worse tools for a continental cause has stopped being useful to the client — and has stopped helping Europe too, since a vendor propped up by sympathy purchases learns nothing.

What we will not do is let the default go untested. The question we ask in an evaluation is not “is there a European option?” but “did a European option get a fair hearing?” In most organisations, most of the time, the honest answer is no.

Why this is the better argument

Sovereignty appeals to risk committees. Competitiveness appeals to the people who set strategy.

It is also the argument that survives contact with someone who has no compliance problem, which is most of the market. Telling a Danish manufacturer that the CLOUD Act might theoretically reach their maintenance records is a weak pitch. Telling them that their shortlist is one of the decisions Draghi is describing is a conversation worth having.

The report closes its foreword with a line that applies as well to a procurement committee as to a Council meeting:

We should abandon the illusion that only procrastination can preserve consensus.

— Ibid., p. 9

Sources: Mario Draghi, The future of European competitiveness — Part A: A competitiveness strategy for Europe, European Commission, September 2024. Page references are to the published Part A, and every quotation above has been checked against it; the report is reused under CC BY 4.0. Implementation figures from the European Policy Innovation Council’s Draghi Implementation Index.