In a market dominated by the large American technology companies, Amazon, Microsoft and Google, a strange player has entered. Schwarz Group, whose main brand in Spain is Lidl and which also owns the Kaufland supermarket chain, has created a unit that offers IT services to third parties. In Spain, this digital arm has a presence in Barcelona, ​​in facilities where 700 specialists work, among whose developments is the Lidl Plus loyalty app. To this hub A recently inaugurated cyber defense center is added.

But the overall size of this IT unit, called Schwarz Digits, is much larger. About 7,500 people work there. It is growing rapidly and already has its own entity within the German group. Today, it allows external companies to contract storage and computing capabilitieswhich serves from its own data centers. In 2023, its revenues reached €1.9 billion.

It all started with an internal need. Years ago, the different companies in the group had different formulas to cover their IT services. The Kaufland supermarket chain (present in central Europe) used SAP, while Lidl had its own ERP system, which it tried to migrate to SAP but ultimately ruled out the option. And at this juncture: “We saw that we had to carry out a transformation in our company. We thought we had to look for a different approach and move towards the cloud,” says Walter Wolf, CEO of Schwarz Digits. They concluded that they needed a cloud service to achieve the scalability and versatility they wanted. “We are retailers and we have peaks of activity on specific days, like Christmas or Black Friday,” recalls the manager.

When they made the decision to take their tools and applications to the cloud studied the market for options. By then the idea was to hire cloud services from a third party. “There were the large American suppliers and also the Chinese ones. And we didn’t see any European alternative in terms of data sovereignty, security and other areas. So we made the decision to build our own cloud,” explains Wolf.

Data centers had to be built, infrastructure and software developed, equipment acquired, and connectivity contracted. In 2020, the system was ready and the first workloads were uploaded to the cloud newly created by Lidl’s parent company. Wolf explains the process: “We develop internally [los servicios]. We mature them, we grow them, we scale them. And, at a certain moment, if we see that they have differential value, we can offer them in the external market.”

Now they not only offer cloud services, in different modalities, but also cybersecurity tools, thanks to the purchase of the Israeli startup XM Cyber ​​in 2021. They spent $700 million on it, a figure that underlines the parent company’s interest in this field. Furthermore, being a well-known business group in Germany, its sales team has access to all types of companies. Among its clients are startups and major entities, such as Bayern Munich or the Port of Hamburg (the third largest in Europe).

“I assume they have good contacts and have thought about trying to capitalize on all the investment they have made,” says Ignacio Cobisa, consulting director at the analyst firm IDC. “They must have capacity above what they need and they are putting it on the market. “They have done what the big suppliers (Amazon, Google) did in their day, which began to look for clients outside.”

The case of Amazon was the first and is the most paradigmatic. In the early 2000s, the e-commerce platform used servers and technology from third parties. But it had multiple problems managing peak demand from its users. So its IT team developed its own tools tailored to its needs. They soon realized the potential and a few years later offered them as a service to external companies. This is how AWS (Amazon Web Services) was born. In 2023, this division had a turnover of $90.8 billion and had reached profitability long before the original e-commerce business.

“We are not emboldened enough to say that we will be the same size as Amazon,” says Wolf. “But we have a specific niche market and customers want to have something like our platform.”

Based on Europe

In 2022, 72% of cloud spending within the EU Amazon, Microsoft and Google monopolized it. Behind were other American companies, IBM, Salesforce and Oracle. And then came the first European companies, the German companies SAP and Deutsche Telekom (each with 2% of the market at that time).

Between 2017 and 2022, European cloud providers rode the wave of technology growth. Together, they increased their turnover by 167%. Despite this, its market share fell from 27% to only 13%. This gives an idea of ​​the slice of the pie that the three big American companies took.

In recent years, the European Union has emphasized the importance of technological independence in certain critical areas. The cloud field is one of them. With initiatives such as Gaia-Xthe EU seeks to stimulate the development of local projects that serve as an alternative to the omnipresent American companies. Cobisa illustrates this motivation: “If we are not able to supply ourselves even minimally when there has been a component crisis, we are in the hands of third parties. And the same thing can happen with the cloud sector.”

This European invoice is one of the commercial claims of the technological unit of the group to which Lidl belongs. “All our data centers are in Germany. They are ours, just like the services we offer. We have developed the software with open source standards,” highlights Wolf. The company has four data centers in Germany and plans to build new facilities.

“Having control over the data, that the data is in the same country, with the context [geopolítico] that we have, is important and is being promoted from Europe,” says Cobisa. Although the analyst emphasizes that there are already other European companies that offer cloud services, such as United Internet OVHcloud.

Added to this offer is the reinforcement of large American suppliers, who have launched build data centers on European soil. One of its reasons: to comply with the GDPR, which makes it difficult to process personal data outside the EU borders.

In any case, it is a rapidly growing market. The IDC projection By 2024, public cloud services in Europe will reach a business volume of $171 billion. By 2027 there will be 298,000 million, which represents an increase of 21% annually. Of course the bite is juicy.

There are still more companies that prefer to keep their data on their own servers. But even these look towards the cloud. “Many companies enter as they reach their periods of obsolescence. If they invested heavily in SAP for their servers three years ago, perhaps within two years those servers no longer have the necessary characteristics to be sufficiently secure,” explains Cobisa. And there, companies have two great options: “Renew all that internally or think that it is not worth it and ask a third party to do it for me in their facilities, but in our country,” adds the analyst. And this is where the European asset plays a fundamental role in attracting customers.