Financial Times: “How Lidl accidentally took on the big guns of cloud computing”

Starting with a system built for internal use in 2021, Lidl owner Schwarz Group now offers cloud computing and cyber security services to corporate customers.

Its IT unit, Schwarz Digits — which became a standalone operating division in 2023 — has signed up clients including Germany’s biggest software group SAP, the country’s most successful football club Bayern Munich and the port of Hamburg. Last year, the unit generated €1.9bn in annual sales and it employs 7,500 staff.

We did not start with a commercial motivation in mind but just wanted to address our own needs, Christian Müller, co-chief executive of Schwarz Digits told the Financial Times in a rare interview. We’re on a very steep growth path.

A main selling point of its service is that all client data is processed and stored exclusively in Germany and Austria, which have stringent privacy and data protection laws.

Olaf Storbeck

Exciting development for a European business to build its own cloud computing system from the ground up – and striking how closely this origin story resembles Amazon’s AWS. I would say this is a good example of how regulation can foster business opportunities. It would probably have been faster and cheaper for Schwarz Group to contract an existing US cloud provider, but since their products are not prioritizing privacy, the more compliant answer was to build an internal solution.

Lidl built a cloud computing system for its own use but found that other German businesses were debating whether they wanted to use the biggest cloud services in the US and China Dreamstime

Another thing of note is that Schwarz is a privately held business, with more leeway on capital investments than publicly listed companies, which need to keep their margins up to please shareholders at each quarterly filing. Also, innovations in business models – in this case cloud computing – are easier to replicate in our current fast-paced information environment; the same might happen on the AI front, with multiple smaller players offering various, more targeted artificial intelligence models instead of a big corporation cornering the entire market.

I do take some issue with the title implying the company arrived at this point ‘accidentally’, when the entire text of the article describes this as a deliberate decision to avoid the risks of external cloud providers.