As Europe’s digital transition accelerates, ensuring technological sovereignty is becoming critical. Small and medium-sized enterprises (SMEs) are key players in areas like AI, cybersecurity, and cloud infrastructure.
Sebastiano Toffaletti, Secretary-General of the European DIGITAL SME Alliance, explains why empowering these innovators is essential to reducing foreign tech dependence and securing Europe’s digital future.
NV: What does technological sovereignty mean for you, and how can tech SMEs play a central role in attaining it?
Toffaletti: Technological sovereignty means creating a robust and independent digital ecosystem that underpins Europe’s values, priorities, and security needs. Europe’s current dependence on foreign technology limits its geopolitical autonomy and constrains its ability to act decisively in a rapidly changing global landscape, while also posing significant security risks.
Economically, this reliance siphons away immense value created in the digital realm – value Europe must harness to ensure its place in the global economy. As highlighted in the Draghi report, the productivity gap between the EU and the US is largely explained by the tech sector. Without swift action, Europe risks being permanently relegated to the role of a user, not a leader, in digital technologies.
Thousands of digital SMEs and startups are hidden champions in all fields of technology—from AI to cloud, quantum computing, data analytics, cybersecurity, blockchain, and more.
Many of these companies are at the cutting edge of innovation and directly compete with global tech giants. Yet they lack the network effects, economies of scale, and financial resources of their competitors.
The EU must leverage the strength of its tech SMEs to achieve sovereignty and competitiveness. The first priority is to gain control of the critical infrastructures that underpin digital ecosystems.
Europe can do so by creating market demand for EU sovereign services and by supporting the federation of our SMEs around open APIs and interoperability standards. In parallel, Europe needs a sovereign digital skills strategy to train the next generations of IT professionals on technologies owned and developed by European companies.
NV: What are the most urgent challenges facing European SMEs in their digital transformation, and how can the EU and other stakeholders support them?
Toffaletti: The most pressing challenge for European SMEs is access to sovereign digital infrastructure: cloud computing, AI language models, online platforms.
The absence of a strong, independent ecosystem—what we call the “EuroStack”—forces European businesses and public administrations to rely on US tech giants. This not only stifles the growth of Europe’s tech sector but also undermines efforts toward digital sovereignty.
The EuroStack represents a vision for a comprehensive, European-led technology stack, spanning connectivity, cloud, edge, high-performance computing, quantum technologies, and decentralised AI services. Such an ecosystem would enable Europe’s SMEs to flourish as creators of cutting-edge solutions, particularly in strategic sectors.
Beyond infrastructure, SMEs face challenges in securing adequate funding and resources. Developing new technologies requires sustained investment, which many SMEs struggle to access. The proposal to introduce a European preference in public procurement through a review of the Public Procurement Directive is promising.
It could be a first step towards a Buy European Tech Act that promotes EU-made products and supports the strategic objectives of the twin transition.
Additionally, financial instruments, public-private partnerships, and EU funding programmes must be enhanced to ensure innovative SMEs can thrive.
Another critical challenge is the shortage of digital skills. SMEs often lack access to the talent needed to master advanced technologies. Upskilling programmes, lifelong learning, and collaboration between academia and industry need support.
Most importantly, Europe must set its own priorities and standards on digital skills, which are currently delegated to private training and certifications from US vendors.
NV: How do you see the Digital Single Market evolving in the coming years, and what specific steps are needed to ensure SMEs can thrive in this space?
Toffaletti: The Digital Single Market must be reimagined to integrate interoperability, streamline cross-border operations, and enable the seamless exchange of data.
Realising the “5th Freedom”—the free movement of research, innovation and data, as envisioned by Enrico Letta – is critical to creating a thriving ecosystem for European SMEs.
For SMEs to flourish, regulations and standards must be harmonised across Member States to reduce barriers and allow companies to operate across borders. A level playing field will help SMEs scale their innovations and compete internationally.
Establishing robust, interoperable systems for data and digital services will also allow SMEs to collaborate more effectively. Interoperability strengthens the collective capability of Europe’s tech ecosystem, allowing smaller players to create value in areas traditionally dominated by larger foreign companies.
Clear guidelines and funding initiatives are needed to prioritise SME involvement in critical areas such as AI, cybersecurity, and green tech. Tailored policies can encourage SMEs to develop solutions aligned with Europe’s goals for sustainability and digital resilience.
NV: Is the ‘simplification’ promised by Von der Leyen going to make SMEs more competitive in the digital space?
Toffaletti: It is important that the Commission delivers on its promise to cut red tape and simplify rules for companies. The amount and complexity of laws introduced in recent years, especially in the digital sector, is astonishing.
Much of it has not yet become fully enforceable, like the AI Act, NIS2 and the Cyber Resilience Act. Tens of thousands of companies will be impacted, either directly or as suppliers. They demand urgent action.
At the same time, we must recognise that some EU legislation is protective of SMEs. These laws are not based on geography but on roles in the value chain.
The DMA and the DSA, which set obligations for large online platforms, and the Data Act, which prevents manufacturers from restricting users from sharing data with independent companies, are crucial to ensuring equal opportunities.
Finally, the Commission should make available, free of charge for SMEs, software solutions that perform EU law compliance checks. There are already such tools on the market or soon to be released. This is a cost-effective solution that can be deployed quickly.
[Edited By Brian Maguire | Euractiv’s Advocacy Lab ]
