It was a jolting wake up call. It's time to stop tip-toeing into the digital future. It's time to unleash from the status quo that's limiting possibilities.
“Europe largely missed out on the digital revolution led by the internet and the productivity gains it brought,” wrotes Mario Draghi in his influential report The Future of European Competitiveness. Produced for the European Commission, the former Prime Minister of Italy shook European nations, politicians, and business leaders with a barrage of reasons why Europe needs to urgently step up its technological competitiveness against the U.S. and China.
Europe needs to digitize fast, advised the report. That requires building IT infrastructure that can foster greater innovation. As artificial intelligence (AI) increasingly becomes a vehicle to gain a competitive edge, European nations are stepping up to build new data centers. While data center investments are growing across the continent, some wonder if a lack of strategic direction is holding Europe back.
Urgent Need for Data Centers
Draghi’s report was commissioned by the European Commission, which is the civil service of the European Union. It was intended to reveal priorities European nations could act upon swiftly to stem the tide of economic prosperity that has shifted strongly toward the U.S. and China.
“Europe has been worrying about slowing growth since the start of this century,” Draghi’s report stated. “Various strategies to raise growth rates have come and gone, but the trend has remained unchanged.”
The result is that US citizens have more money in their pockets than their European cousins, and U.S. firms dominate the technology sector.
Bar a few notable exceptions such as SAP and specialists like e-commerce provider Scayle, Europe cannot compete with the U.S. in technology, and China is rising quickly.
“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,” Draghi warned in the report.
Draghi is not alone in his concerns. Data center experts believe Europe is at risk of falling behind, which in turn will slow down Europe’s ability to compete in the artificial intelligence (AI) race.
“To remain competitive globally and to support the continuing wave of technological development and digital transformation, the data center industry must ensure continued focus on efficiency and sustainability while driving innovation,” explained Michael Winterson, Secretary General of the European Data Centre Association (EUDCA).
Business advisory firm KPMG explained the challenges Europe faces.
“Despite broad growth, Europe lags behind both China and the U.S. in data center construction,” wrote KPMG in an article titled Data Centers: Core Infrastructure of the 21st Century. According to recent research, Europe is currently home to around 1,200 dedicated data centre sites compared to the US’s ~5,000, with inventory growth in 2024 of over 24% in North America compared to 20% in Europe.”
Calling for more data centers isn’t just about meeting business demand. Expanding the number of data centers can bring broader economic benefits, according to KPMG. It sees data center market revenue growing 10% year over year between 2023 and 2032. In 2024, its expected to generate $77.9 billion. In comparison, the U.S. data centre market is expected to generate $137.50 billion in revenue in 2025, with a compound growth rate of 6.17% from 2023 to 2032.
Data Centers Build Out Across Europe
Europe’s data center market is not ossified. The major trading cities of Amsterdam, London and Frankfurt are challenging environments for new construction due to high land prices. This is creates opportunities for the Nordics and fast growing tech hubs such as Barcelona, Madrid and Milan.
As the data center sector encounters similar construction challenges to airports, the firms that have built and operated the jet plane era are entering the fray. Spain’s Ferrovial launched a Digital Infrastructure Division in 2024. Dimitris Bountolos, chief information and innovation officer (CIIO) at Ferrovial, explained the firm’s entry into the European and U.S. markets in an interview with The Forecast.
“We have been involved in data centers for 40 years, building them for the hyperscalers and Co-location operators,” Bountolos said. “In the past, there were a lot of bottlenecks in the process to do with the design, tenders and different pieces of infrastructure.
“We can solve this and harmonize the different pieces of infrastructure needed.”
Building State-of-the-Art Data Centers
Europe aims to do more than just build more data centers. It must builds data centers that meet sustainability regulations and respect the culture of the region. A number of projects reveal innovation is at the heart of data center growth in Europe.
Data center analyst firm Mordor Intelligence state that operational efficiency and resource management are strong in the region, as is the adoption of clean energy to power data centers. It found that server rack space utilization in Europe was typically at 74%. Geopolitical disruption in the region spurred new thinking about energy efficiency. For example, heating projects in Sweden, France and the UK take excess heat from data centers and use it to heat homes and swimming pools. In the Ile-de-France region, 7000 homes will soon benefit from heat recovery from two new data centers with 24 halls being built close to Paris by CloudHQ.
In the southwest of the UK, a small edge data center is heating a public swimming pool in Devon. Following the banking crisis and Brexit, public services in the UK have suffered 14 years of funding cuts, with many communities unable to operate swimming pools.
Add to that, reports of collaboration among data center operators, telcos, technology vendors, and cloud service providers, indicating their efforts will increase data center capacity.
Data Sovereignty Demands IT
Having more data centers could not only lead to Europe’s competitiveness, it’s necessary to maintain digital data sovereignty regulations. The forthcoming Cloud and AI Development Act for Europe intends to increase the pace of data center construction approval, which the European Union sees as necessary for developing sovereign cloud services for AI adoption and innovation in the region.
Forrester analyst Tacey Woo has observed an increased demand for data sovereignty as organizations seek to keep their data in the country they operate. CIOs in financial and professional services, as well as those within international logistics, told The Forecast that they are putting greater data sovereignty demands on their IT suppliers. AI is driving this concern, according to one CIO.
“As suppliers introduce AI, it is not always easy to get the correct level of detail or evidence from what data is being used to train the supplier model, or where that data is stored,” the CIO said.
The CIIO of Ferrovial described the challenge of managing digital data in Europe.
“Competitiveness, latency, efficiency and legal frameworks for how we manage data are components that will keep increasing as data is the new oil, and sovereign data is key, as we have clients that require all of the data in their own geographies,” Bountolous said.
A New Vision
Europe’s data center market is growing to meet the changing needs of its citizens and businesses. Many question if the pace of growth lags to far behind other economic regions. Still, the European Union plans to triple the data center capacity in the next five years through its AI Continent Plan, which aims to reduce Europe's dependence on overseas AI technologies.
Funding and strategies are only part of the picture. According to Draghi’s report, the EU is entering its first period in history where growth will not come from a rising population, because its population is aging and shrinking. To counter this, Europe needs to adopt the culture of innovation that is evident in both the US and China.
“The only way to meet this challenge is to grow and become more productive, preserving our values of equity and social inclusion,” Draghi’s report stated. “And the only way to become more productive is for Europe to radically change.”
Mark Chillingworth writes about leaders in business and technology. He’s a regular contributor to Digimonica. Find him on LinkedIn. Read his previous story on The Forecast: Choosing to Build vs. Buy Enterprise Apps.
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