Davos 2026 - the end of a week when tech sovereignty in Europe was all too on point an issue

Whatever else Davos 2026 will be remembered for, it’s pretty safe to say it won’t be for the positive impact it’s had on US/European relations. With that in mind, a panel debate on European tech sovereignty seemed uncannily well-timed.

The session started from the downbeat, but sadly realistic, premise that Europe presently punches below its weight in the global tech race. That being the case, who’s to blame for this - and what can be done to address it?

Aiman Ezzat, CEO of European services giant Capgemini, struck a sombre note when he observed:

The reality is that we have a huge amount of dependency on US technology today. [Europe] let go of all our hardware players. I mean, I'm old enough to remember Olivetti and ICL and Bull. They are gone. We did not invest early enough in the cloud to be able to create European cloud player. Why? Because it requires very heavy capital investment, and there were not many companies that had basically the ability to put up the money up front to be able to create the scale to become cloud players.

There are a number of socio-economic and political factors in play in Europe as well, he argued:

Some of the challenges are really around fragmentation. The reality is that Europe, when it comes to rules and regulation, is not completely uniform. There are different countries with different constraints. Usually, when you see even start-ups, they don't think European. They think country first, and they start to take shape in their country before they think about going [elsewhere].  If you're in the US, you immediately look at the US market. Why is that happening? Because it's complicated to work across borders. It's not yet very simple in the tech world, to work across borders.

Then there’s the basic matter of funding of tech start-ups to grow a mainstream industry:

Sometimes there is funding, but the funding is linked to one country, and this country wants you set up everything and hire resources and do the growth in the country where the funding is coming from...There’s a bit of risk aversion as well compared to US market.  Americans love growth;  in Europe, people want to make sure that the profit is going to turn out right. In the US, you can grow by 25% not making any money for 10 years, and everybody is okay with that. In Europe within two years, people say, 'OK. I cannot keep investing’.

And then of course there’s the question of the regulatory regime under which EU companies are expected to operate. US firms have long criticised the bloc of being pre-emptive and overly-prescriptive in its approach to regulation. Ezzat appears to have sympathy here:

The question is the extent to which we regulate, especially around AI, the question is are we regulating a bit too early, and it's too comprehensive, compared to the evolution of the technology? It's an evolving technology. It's new. We went a little bit too...For me, if you regulate technology, you kill innovation. So, regulate the use of technology, but you have to try to avoid the regulation of technology to make sure that you foster innovation, and people don't start to be afraid and say; 'If that's the case, I'm going to go and do it somewhere else.' That's what we want to avoid.

An ongoing problem

Christian Klein, CEO of German enterprise tech powerhouse SAP, one of the few European software houses that can claim genuine global status, made the point that none of this is a new problem:

I speak a lot to young founders in Europe and a lot of times, US investors come in and say, 'Please move to the US' It's not new...there's one market, you have scale, you can hire people, and they  can start in two weeks. When you hire a good developer in Germany, it takes you four months! That matters in a world which is moving so fast, especially in AI.

It's very, very important that we are giving [entrepreneurs] the access to capital, but also giving them a market to scale. I'm all in for Europe, but we really need to form this digital union, which is so important, It's [about] money and scale and speed. There's not a lot a lack of talent. There's not a lack of data in Europe. We have a lot of the ingredients, so we should not, you know, talk ourselves into a depression or close to being suicidal. We have a lot of strong assets, and we know what we have to do. What I feel is very important these days is leadership.

He also makes a valid point about techno-envy of the US, sometimes cited by critics of European legislators as being an underlying driver for excessive approaches to regulation:

We should not try to become the next hyperscaler. Is this really so important for us? No, we have other strengths in Europe. We have strong industries. We have a lot of data, and we need to see how can we apply AI to be the world leader in Life Sciences, to be the world's leader in Manufacturing? Because we can't compete everywhere in Europe on energy, on labor costs. That is why it's even more important that we now need to play a different game. We need to play a game where Europe has a lot of strengths, and we as business leaders and as political leaders give these young start-ups the framework they need.

Europe may need to modify its attitude towards the concept of sovereignty, he suggested:

SAP runs big parts of the US economy and big parts of the public sector, very mission=-critical parts, and I've never heard a US Government member saying, ‘Are you Europe? Are you US?’.  No, they give us clear rules what sovereignty means, and we need to adhere to that. I think sometimes in Europe, we take the sovereignty topic very emotionally, maybe too emotional.

A piece of hardware from the US will be always included in a tech stack, that's for sure. Is this now a mission critical thing for the sovereignty of Europe? I can port any ERP from one infrastructure to another infrastructure in four weeks. I cannot port a customer from SAP supply chain software or mission critical manufacturing [software] in four weeks from one system to another. So what I want to say with that is we need to spend more time on having better access to data, and really playing a game which the US and China have not yet played.

That game revolves around data and data access, he explained:

We are working so hard to also make sure that we have better access to data. I can remember the early days when we wanted to start using data to train our Machine Learning modules. I asked my data protection officer, ‘Can I use this and this?’ and I always get a no. I said, ‘What is the time when you say yes, because I need a solution to that?’. There are so many regulations, layer over layer. In Europe we need one layer of regulation for the data access, but we don't need layer over layer.

The legislator view

Henna Virkkunen, Executive Vice-President for Tech Sovereignty, Security and Democracy, European Commission, is one of those who is responsible for peeling back those layers. She said:

What I see is that Europe has everything that is needed to be competitive. For example, when it comes to technologies, we have thousands of start-ups who are developing and training AI. We have very strong science and research, and also a very strong industrial base. But then also we have identified these problems that, for example, our start-ups have difficulties scaling up their businesses in Europe. We have, annually, quite similar numbers of start-ups established in the European Union [as the] USA. But when we look at scale ups, [the percentages are] only eight percent  in Europe and 60% in USA. So it tells clearly our start-ups that they have to move to USA to scale up their businesses.

There is a fragmented market issue, she conceded:

We have to really create one single market and access to capital and, of course, an overall regulatory environment. So we have to simplify the things. We have to make Europe faster and easier for the businesses. Often, when we speak about innovative companies, they have often also very innovative products, and authorization processes in Europe can be very lengthy if you have new kind of materials or products to enter to the market. So clearly, we have to make Europe faster, easier, simpler for businesses overall.

There is a one distinction that needs to be made in the future, Virkunnen suggested:

From my perspective, it's very important that we have in the digital field only regulations, because previously we have had directives. And directive means that all the member states are implementing [the rules] in a different manner...It’s better to have one [piece of] European legislation than 27 different ones, and the challenge at the European level is that if we are not coming quite early with our European rules, then our member states start to already establish their own rules, and that's why the European Union came quite early with the AI Act.

But she concluded:

With the USA, it's not so black and white. It’s not like the USA is not having any rules there... at the State level, there are more than 200 different regulations on AI.

My take

Remember, sovereignty is not one moralistic thing. It's not either we are or we have or we don't have.

A wise warning from Ezzat. Reducing questions of sovereignty to knee-jerk soundbites is the road to Brexit and that’s a whole other story that didn’t get raised during this session at Davos.

The failure of Europe to grow its own tech industry is not a recent phenomenon. I can remember 30 years ago being told by an excited US CEO about a fantastic software firm based in Dallas, Texas that he was rolling out at his firm. As he explained more about this, I realised it was a UK firm that was actually HQ-ed in London, but for the purposes of selling into the US it chose to fly under a flag of convenience. Klein makes the point that SAP’s nationality is not questioned in US circles, but that wasn’t always the case as those with long enough memories will recall.

Europe did indeed cast aside its national champions such as ICL and Groupe Bull and in so doing committed self-inflicted damage from which it has never quite recovered. The skills are there, the ideas are there, the talent is abounding, but Europe just does not provide the nurturing environment for green shoots to flourish in its soil. How can we blame start-ups and innovators for being tempted away by the Yankee dollar? We're practically driving them to the airport through indifference! 

Meanwhile the fetishisation of US tech leaders has become a political necessity as EU nations (and Brexit Britain) compete to pick up lucrative inward investment deals from Silicon Valley. If that means a national leader cosying up to Elon Musk or Jensen Huang for a love-in, so be it - no-one’s talking sovereignty then, are they?

But let’s finish off Davos week with one last note of Euro-optimism courtesy of Klein:

There will be more SAPs.

Let’s hope so.

Onwards!