From Hidden Champion to European Cloud Leader: Insights from UpCloud’s CEO

The European cloud industry is at a turning point. Rising geopolitical tensions, stricter regulations like GDPR and the AI Act, and growing awareness of vendor lock-in are reshaping how businesses think about infrastructure. The hyperscalers may dominate headlines, but a new chapter is unfolding – one in which European cloud providers play a decisive role.

This was the focus of the season finale of Cloudscapes, the UpCloud podcast, where our CEO Arno Schäfer shared his perspective on sovereignty, trust, and why Europe needs its own cloud champions. The conversation looked beyond day-to-day operations, zooming out to the bigger shifts happening in the industry.

“To comply with European laws and to build a European sovereign cloud is not a nice-to-have anymore – it’s a must-have.”

Arno Schäfer, CEO at UpCloud

Listen to the full conversation on Cloudscapes available on YouTube, Spotify, Apple Podcasts or your favorite podcast platform.

The Case for European Cloud Sovereignty

For years, compliance was seen as a burden. Today, it is a strategic advantage. European businesses want more than low costs and performance – they want trust. They want to know their data is governed by European law, not exposed to extraterritorial demands.

Schäfer points out that this shift has been accelerated by global politics:

“The geopolitical developments of the past year have changed everything. European sovereignty in the cloud isn’t optional – it’s a core necessity.”

Arno Schäfer, CEO at UpCloud

The Sovereignty Illusion of U.S. Providers

In response to European demand, U.S. hyperscalers have launched “sovereign” offerings marketed on four pillars:

• Data Residency – storing data exclusively in EU-based data centers.
• EU-Only Access and Operations – restricting technical support and operations to EU staff.
• Encryption & Key Management – services like BYOK (“Bring Your Own Key”) or HYOK (“Hold Your Own Key”).
• Local Partnerships – independent partner clouds legally anchored in the EU.

At first glance, these measures seem reassuring. Yet they cannot overcome one decisive fact: the U.S. Clarifying Lawful Overseas Use of Data Act (CLOUD Act) (2018) obliges American companies to hand over customer data under their possession, custody or control, regardless of where it is stored.

• Physical location does not shield data from U.S. jurisdiction. The parent company’s U.S. jurisdiction supersedes data residency. For instance, France’s highest administrative court, the Conseil d’Etat ruled that a Luxembourg subsidiary of AWS is subject to U.S. authorities’  requests despite hosting data only in Germany and France.
• Encryption can be an impractical approach to data sovereignty, as it comes with a cost in performance, and the provider is still required to disclose the encrypted data.
• Microsoft France’s own Director of Public and Legal Affairs admitted before the French Senate in June 2025 that he could not guarantee French citizens’ data would never be transferred to U.S. authorities.

The conclusion is stark: while these measures improve security and operational oversight, they do not guarantee true data sovereignty. Only providers outside the reach of U.S. extraterritorial jurisdiction – European cloud companies – can offer this assurance.

Beyond Price: What Businesses Should Really Look For

Many companies still approach cloud decisions with price as the main filter. But Schäfer argues this can be a trap:

“Focusing too much on price without understanding the long-term implications – vendor lock-in, unused features, technical debt – creates real risks.”

Arno Schäfer, CEO at UpCloud

Instead, businesses should prioritize flexibility, transparency, and scalability. For example, UpCloud’s approach of no egress fees and easy switching between public and private cloud addresses some of the most common pain points customers face.

Ultimately, as Schäfer notes, “It’s not just about infrastructure. It’s about enabling your business goals.”

From Hidden Champion to Recognized Force

Despite strong products, a reputation for reliability, and a loyal customer base, many clients have referred to UpCloud as a “hidden champion.” The phrase reflects the company’s ability to quietly outperform expectations – delivering speed, stability, and service without always being in the spotlight.

For Arno Schäfer, this description is both flattering and motivating. It acknowledges the technical excellence and customer trust that UpCloud has earned, but also points to a gap in visibility. Bridging that gap is central to Schäfer’s vision. The goal is not simply to remain a reliable alternative in the European market, but to step into the foreground as a recognized leader. That means strengthening UpCloud’s brand presence, expanding partnerships, and ensuring the company’s values – transparency, sovereignty, and customer-first innovation – are clearly understood across industries.

Ultimately, Schäfer wants decision-makers across Europe to see UpCloud not as a niche player, but as a strategic partner, capable of shaping their long-term cloud strategies. The transition from hidden champion to recognized force is about claiming a rightful place among Europe’s trusted technology leaders.

What Comes Next

With AI adoption growing, compliance requirements tightening, and multi-cloud strategies becoming the norm, the European cloud market is entering a decisive phase. Schäfer sees this as a moment not just for UpCloud, but for Europe as a whole:

“These are exciting times. There’s real momentum for European providers, and it’s on us to seize it.”

Arno Schäfer, CEO at UpCloud

The path forward isn’t about mimicking hyperscalers. It’s about building trusted, sovereign, high-performance cloud infrastructure that reflects Europe’s values and serves businesses’ real needs.

You can hear more of Arno’s perspective in the Cloudscapes season finale, where he dives deeper into sovereignty, customer trust, and the future of European cloud, available on YouTube, Spotify, Apple Podcasts, or your favorite podcast platform.