The battle cry of 2025: Do cloud local!

Microclouds can have many names and offer many features. They can be hosted by a regional cloud provider or specialize in a specific use case, such as the rise of GPU cloud providers focusing on the exploding AI space. They could even be clouds that don’t have an international presence and are instead located in a single country.

Microcloud vendors are all moving toward the same objective: Provide alternatives to the big public cloud providers by offering more business value and personalized services. So far, it’s working.

Rise of regional providers

The public cloud computing landscape, dominated by Amazon Web Services, Google Cloud, and Microsoft Azure, is shifting as regional providers emerge. Indeed, it’s possible that the tech giants are facing greater challenges than they are ready to acknowledge.

Concerns about dependency, data sovereignty, and the lack of competition have spurred demand for alternatives. Many businesses are also looking for providers that work in specific geographical regions or that understand the privacy or compliance regulations for a particular region or country.

An excellent example of this is Lidl grocery stores, a German discount retail chain that operates more than 12,000 stores worldwide. Schwarz Digits is Lidl’s former IT division that has emerged as a leading regional cloud provider with digital products and services that comply with strict data protection standards and sovereignty laws. Last year it transitioned into a stand-alone entity, generating €1.9 billion in revenue by 2023 with a workforce of 7,500. That’s not micro.

Its rise centers on offering data sovereignty. This is especially attractive for companies subject to strict European data protection regulations like General Data Protection Regulation (GDPR). By storing data solely in Germany and Austria, Schwarz Digits has attracted clients seeking robust data control that prioritizes privacy and regulatory compliance.

I’m often teased when I use this as an example. “You trust a grocery store to host your data?” Well, countless enterprises trust a bookseller with their cloud computing products and services. This is not much different.

Promising alternatives

Does this mean I am promoting microclouds as the new go-to option for public cloud services? Not at all. For many companies, it’s crucial to have an international presence and access to thousands of cloud services, from AI toolkits to databases to development ecosystems. The new regional providers won’t be able to compete with that level of products and services, but that doesn’t matter.

None of these smaller players talk about wanting to knock the Big Three providers off their pedestals. Instead, they are looking to provide a value-driven alternative that can return more value to certain businesses. With cost being a significant concern for those using the larger providers, this is an alternative offered at the right time in the maturation of the cloud market.

Microclouds offer solutions that address the deficiencies of global giants. Besides data sovereignty, their agility enables them to rapidly adapt solutions to meet local regulatory and cultural demands, unlike larger cloud providers’ one-size-fits-all approach. However, these regional entities can’t scale to match the global infrastructure. They are unlikely to make that investment anytime soon. Also, developing extensive partner networks is a requirement for continuing customer acquisition and service maintenance.

In their defense, the regional entities will quickly recommend that you go to the Big Three if you’re looking for those attributes. They are focused on providing essential services at a good value, which is what many businesses are looking for. Enterprises want storage, compute, and security that is sound and cost-effective. Indeed, if that is all they are utilizing from a more prominent provider; they might as well pay the lower price of a microcloud. The larger providers are sending many smaller enterprises to the poorhouse, given the cost of these cloud services in 2025.

Market adjustments

The cloud market is expected to diversify as regional providers chip away at the giants’ dominance. Although these smaller vendors face obstacles in scalability and credibility, their entrance introduces essential competition and aligns services better with local needs. The future of the cloud ecosystem will likely involve both global and regional players.

So, is this a massive shift? Not really. It’s an adjustment. Alternatives are needed given the cost-to-value problems that public cloud computing seems to be developing. Microcloud providers fill that need to the point that many enterprises may rely entirely on one of two of these smaller players and kick the big providers to the curb. This won’t be a drastic market upheaval that makes us suddenly take notice, but it’s a movement, nonetheless.