Government IT Spending Powers Europe’s Tech Future

With mounting geopolitical and trade tensions prompting an increasing number of European entities to rethink their dependence on US technology vendors, public sector bodies are pioneering a potential transition toward homegrown tech solutions. 

For instance, Schleswig-Holstein in Germany is migrating tens of thousands of its staff from Microsoft applications like Office, Windows, and Exchange to open-source alternatives. Similarly, Denmark’s Ministry of Digitalization has initiated the replacement of Office 365 with LibreOffice. The French government also recently unveiled intentions to replace Microsoft Teams and Zoom with its proprietary video conferencing service for 200,000 employees, which could result in annual licensing cost savings of €2 million.

Nevertheless, such instances remain uncommon, and the European public sector largely continues to depend heavily on US providers. 

Annually, the German federal government allocates €481 million to Microsoft licenses, a detail uncovered in a recent parliamentary inquiry by Rebecca Lenhard, a Green Party member of the German Parliament. Lenhard, speaking at a recent roundtable organized by the German open-source software firm Nextcloud, noted that this sum represents only federal expenditure, with the aggregate amount across German states being “undoubtedly even greater.” She added, “We are investing a substantial amount in a single company on which we are entirely reliant.”

The current heightened focus on European digital sovereignty stems from a clear ambition to lessen reliance on non-European technology providers.  

However, this trend isn’t universally viewed favorably. Various technology leaders have recently expressed apprehension regarding digital sovereignty initiatives, suggesting these could elevate operational expenses and hinder the adoption of digital tools within the region, thereby impeding productivity and competitiveness.

Despite these reservations, the concept of digital sovereignty continues to gain momentum among European entities, with a rising number intending to boost their cloud computing investments with local suppliers. Gartner forecasts that sovereign cloud infrastructure-as-a-service revenues will triple by the close of 2027. 

This issue has emerged as a strategic priority for both national governments and the EU. Last November, leaders from France and Germany committed to enhancing the deployment of open-source technologies within government bodies as part of this initiative. 

According to Lenhard, a member of the Bundestag’s Committee on Digital Transformation and Government Modernization, open-source software ought to be the “standard choice” throughout Germany’s public sector.

Kim van Sparrentak, a Dutch Member of the European Parliament from the Group of the Greens/European Free Alliance, stated that “public procurement is one of the critical areas where change is needed.” Van Sparrentak argued that a “buy European” strategy should be prioritized when feasible, clarifying that this isn’t a “prerequisite for all technologies — because it’s maybe not possible yet — but for the critical aspects of government at least.” 

Lenhard highlighted that the state could also function as a “significant anchor client,” fostering the expansion of a broader European ecosystem of technology and service providers, which presently pales in comparison to the US tech industry. This would enable businesses to “better anticipate demand, [and] invest capital into their products so they continually improve,” she explained.

According to a 2025 report from Cigref, a non-profit organization representing French businesses and public administrations, European entities collectively spend an estimated €265 billion annually on US software and services. 

Mirko Boehm, who serves as senior director for Community Development at the Linux Foundation Europe, suggested that policymakers ought to “mandate that all significant IT procurements incorporate an evaluation of strategic dependency.”

Boehm emphasized, “When a ministry in any member state enters an agreement with a hyperscaler, it extends beyond a mere IT decision; it’s also an industrial policy decision, a workforce development decision, a technology transfer decision, and a digital sovereignty decision.” He added, “These numerous costs are presently overlooked in procurement processes.”

Boehm pointed out that each euro allocated to public sector procurement yields several times its value in subsequent economic activity, a advantage that Europe forfeits by predominantly acquiring its technologies from US tech corporations. 

Boehm articulated, “For instance, when European governments procure services from non-European hyperscalers, that economic multiplier effect is realized within *their* innovation ecosystem, not ours.” He further noted, “The employment opportunities, the vendor networks, the R&D investments, the tax revenues — all these benefits accumulate elsewhere.”

Boehm asserted that open-source technologies offer European organizations an alternative to “preserve this economic multiplier.”

He concluded, “The reliance we observe today is fundamentally a choice we have exercised. It is not an unavoidable outcome.” He then added, “We possess the alternatives… what is needed is political resolve.”