Digital sovereignty is no longer a topic that only concerns government bodies and large corporations.
For Germany’s mid-market companies, it increasingly determines how well they can keep operating when a cloud provider raises its prices, a supplier fails, or a new law changes the rules.
I’m Miki, managing director of DECODE in Düsseldorf.
In conversations with mid-market business owners, I’m seeing this topic shift from an abstract IT question into a real business priority.
And for good reason.
Key takeaways
Digital sovereignty means your company decides for itself where its data lives, who can access it, and which systems run your business, not a vendor or a foreign law.
Digital sovereignty has three dimensions: technical sovereignty (can you switch providers without putting the business at risk?), legal sovereignty (is your data subject to foreign law, like the US CLOUD Act?), and strategic sovereignty (how much does your competitiveness depend on a single provider’s decisions?).
The pressure is rising fast: since December 2025, NIS2 has applied to roughly 29,500 German companies, with fines of up to €10 million and personal liability for management.
Independence is mid-market thinking: if you’ve never wanted to depend on a single bank or a single major customer, apply that same logic to your IT now.
What digital sovereignty actually means for mid-sized companies
Digital sovereignty means your company can decide for itself where its data lives, who can access it, and which systems form the backbone of your business.
Not a vendor, not a foreign law, not a geopolitical decision you have no influence over.
That might sound like a compliance topic. But it’s really a question of your ability to act as a business.
The three dimensions of digital sovereignty: technical, legal, strategic
Digital sovereignty breaks down into three levels that influence each other:
- Technical: Can you migrate your systems, data, and applications to a different provider without putting your business at risk? Or are you locked in?
- Legal: Is your data subject to foreign laws, such as the US CLOUD Act, that make European data protection harder to guarantee?
- Strategic: How much does your competitiveness depend on decisions made by external providers you have no control over?
Picture a mid-sized manufacturer whose entire production planning runs on a single US cloud platform. It’s dependent across all three dimensions at once.
If the service goes down, production stops. If the legal situation changes, they run into compliance issues. If the provider raises its prices, there’s no room to negotiate.
Why the topic is gaining traction right now
Digital sovereignty isn’t new, but the pressure to deal with it has clearly grown over the past two years. Here are some of the main reasons.
Geopolitical dependencies and new EU regulations
German companies are more dependent on foreign technology today than they were a year ago.
81% of German companies see themselves as dependent on digital imports from the US, and 51% call themselves strongly dependent, a sharp rise from 41% at the start of 2025.
Even more striking: 90% of companies rely on imported digital technology from abroad, mainly from the US and China. 96% can barely operate at all without imported digital technology.
At the same time, regulation is tightening.
Germany’s NIS2 transposition law has been in force since December 6, 2025, setting stricter IT security requirements with no transition period for the required measures.
Around 29,500 companies in Germany fall under it, many of them mid-sized suppliers and manufacturers that cross the revenue or headcount threshold without realizing it.
Companies that fall under the law and fail to meet its requirements risk fines of up to €10 million, plus personal liability for management.
Initial setup costs run roughly €100,000 to €500,000. Existing companies subject to registration must register by March 6, 2026.
In parallel, the first obligations under the EU AI Act have applied since February and August 2025, with further transparency requirements coming into force in August 2026.
For many business owners, this can feel like a wave of regulation with no end in sight. But it follows one clear direction: Europe wants to regain control of its own digital infrastructure.
Rising cyber risk and fragile supply chains
The more digitally connected your company is, the bigger its attack surface.
A cyberattack on a central service provider no longer just hits that provider, it hits every company that depends on its systems.
The same logic applies to classic supply chain risk.
A software vendor filing for insolvency, a data center forced to shut down because of sanctions, a single supplier that suddenly can’t deliver.
The impact is the same either way: a business interruption you didn’t cause yourself.
The biggest risks for non-sovereign mid-market companies
A lack of digital sovereignty rarely shows up as a single dramatic event. It usually creeps in, through rising costs, weaker negotiating power, and a growing loss of control.
Dependence on individual cloud providers and platforms
Europe’s cloud market has lost significant ground in recent years.
European providers’ market share has fallen from 29% in 2017 to around 15% today. Non-European providers now control roughly 85% of the German cloud market.
Even the largest European providers, such as SAP and Deutsche Telekom, each hold only around 2% market share.
For an individual mid-sized company, that means real alternatives are scarcer than you’d think, and switching is much harder.
This concentration around a handful of providers means one thing: if a provider raises prices, changes its terms, or shuts down a service, you have little leverage.
This is what’s known as vendor lock-in, the technical and contractual dependence on a single provider that makes leaving expensive or barely feasible.
Loss of control over company data and IT infrastructure
Your data doesn’t just live somewhere. It lives under someone’s jurisdiction.
If your servers are run by a foreign provider, a foreign government can potentially demand access to your information, and you won’t get a vote in that decision.
Here’s an example. A mid-sized supplier runs its order processing, design files, and customer records through one foreign cloud platform.
A shift in political relations, a new sanctions list, or an access restriction imposed from outside can freeze that platform overnight.
And when it freezes, so does production, shipping, invoicing, everything the business depends on.
The biggest risk areas can be summed up like this:
- Cash flow risk: A provider outage or a sudden price increase hits liquidity directly, often without warning.
- Leverage risk: If you’re technically locked into a provider, you have little room to push back when negotiating new contracts.
- Business interruption: Sanctions, legal access, or political decisions can restrict access to your own data and systems.
- Compliance risk: Companies that don’t meet NIS2 requirements risk fines and personal liability for management.
These risks rarely hit every company at full force at the same time, but each one on its own can be existential for a mid-sized company.
Digital sovereignty as a continuation of mid-market thinking
Digital sovereignty isn’t a new, foreign concept imported from the world of IT.
It’s the logical continuation of a principle that has always defined Germany’s mid-market companies: independence.
The classic mid-market company has always made a point of not depending on a single bank, a single major customer, or a single supplier. Diversification has always been the name of the game.
That same instinct has largely been missing when it comes to IT.
Many companies settled on one provider, one platform, one tech stack years ago, without applying the same caution they’d apply to a banking partner or a raw materials supplier.
The good news: the market is already moving in this direction. Europe’s cloud market grew 24% in 2025, and 60 to 61% of IT decision-makers in Western Europe want to expand their use of local, sovereign cloud providers.
In 2026, European investment in sovereign cloud infrastructure is expected to grow 83%, the strongest regional growth anywhere in the world.
Acting now means you’re following a direction the entire European market is already moving in, not chasing an exotic niche trend.
First concrete steps you can take toward digital sovereignty
Building digital sovereignty doesn’t mean overhauling your entire tech stack tomorrow.
It means systematically identifying dependencies and reducing them step by step. You don’t need an external consultant to get started.
Here’s five steps you can do right now:
- Map your dependencies: Put together a simple list of which business-critical systems, data, and processes depend on which single provider.
- Assess criticality: For each system, ask: what happens if this provider fails tomorrow or doubles its prices? Prioritize based on the answer.
- Check your exit clauses: Review your existing contracts. Are there clear terms for data portability and migration if you want to switch providers?
- Get to know alternative providers: You don’t have to switch immediately. It’s enough to know which European or open-source alternatives exist, so you can act if you ever need to.
- Check your NIS2 exposure: Take a short look at whether your company falls under the new thresholds. You can clarify this internally in a few hours.
Moving to more sovereign solutions isn’t free.
For a typical mid-sized company, experts estimate 6 to 12 months of migration time and ongoing costs 15 to 25% higher than with a large hyperscaler.
The EU Data Act is already lowering switching costs meaningfully, since it requires providers to make data portability easier.
These five steps won’t cost you a cent, but within a few weeks they’ll show you exactly where your company is actually vulnerable.
Digital sovereignty as a business decision
Digital sovereignty isn’t decided in the IT department. It’s decided at the leadership table.
It comes down to the same question mid-market companies have asked for decades: how independent do I want to be from individual partners, and what price am I willing to pay for that?
Companies that answer that question actively now, instead of putting it off, gain a real edge.
Regulation, market dynamics, and the geopolitical landscape are all moving in the same direction: more control, more independence, less dependence on any single provider.
Digital sovereignty for mid-market companies: FAQs
No.
Mid-sized companies are often more exposed, since they often lack a dedicated IT department managing a broad set of providers, and more often rely on a single platform.
Often yes, in the short term, because multi-cloud strategies and modular architectures take extra effort.
In the medium term, costs usually fall, because you regain negotiating leverage with providers and avoid hidden migration costs.
No. Sovereignty means freedom of choice.
Many digitally sovereign companies will still use US hyperscalers, but they’ve deliberately prepared alternatives and exit strategies should they become necessary.
Looking for a partner that takes independence seriously?
If you’re asking yourself right now how dependent your own company really is on individual providers, you’re not alone.
Most business owners I talk to first take this question seriously once a concrete risk becomes visible, not before.
At DECODE, we build custom software and modernize existing systems so our clients keep control over their data and their IT infrastructure, instead of handing it to a single provider.
As an ISO 27001-certified company with teams in Düsseldorf and Zagreb, we hold ourselves to the same standard of security and transparency we expect from our own partners.
We don’t sell you an off-the-shelf solution. We sit down with you, look at your actual starting point, and build software that actually fits your company’s needs.
If you want to learn more, feel free to reach out. We’ll be happy to help you take the first steps towards digital sovereignty.
