Global geopolitical uncertainty, trade tensions, and national security concerns are fueling the debate over digital sovereignty as well as the market growth for sovereign cloud services and demand by enterprises for secure, local access to the latest AI tools.

The public cloud has ushered in unprecedented benefits for businesses and governments in terms of data access and data flows. But in uncertain geopolitical times, sensitive data — including government classified information and data generated by regulated industries — requires special protection.

As SAP CEO Christian Klein noted recently in an interview with the Financial Times, these concerns have fueled customer anxiety over cloud infrastructure choices and boosted the concept of “sovereign” data centers, where information remains within national borders.

Sovereign clouds

Historically, governments, government agencies, and a select group of private sector organizations in sensitive areas, including defense and public utilities, led the demand for sovereign clouds. Technology companies, including SAP, have responded by providing highly secure sovereign cloud services.

But in recent months the debate over digital sovereignty has widened. As Hayete Gallot, Google’s president of Customer Experience, recently noted, “Sovereignty used to be a very niche thing that applied to very regulated industries, such as defense and intelligence, and suddenly in the current environment, everybody is thinking about it.”

The EU has proposed spending €20 billion to build five “gigafactories” to facilitate digital sovereignty and help Europe compete more effectively in AI against the predominantly U.S.-based hyperscalers and large language models (LLMs). But others, including Klein, are not convinced that it makes sense to replicate the physical infrastructure built by hyperscalers and others.

The data center hardware race is over

Klein argues that spending billions in government funding in the EU on huge new data centers would be misguided, and that European companies already have control and sovereignty over their own data. “The hardware train has left [the station],” he said. Together with other senior SAP executives, he also argues that digital sovereignty is about more than physical infrastructure — the operational, technical, and legal dimensions of data sovereignty matter just as much.

Crucially, SAP Sovereign Cloud offers a model that keeps customer data within national borders and in compliance with local laws, without the need to replicate the existing physical infrastructure. Its services, developed over the past 20 years, are already provided to some of the most security-sensitive organizations in the world, including those in the U.S. through SAP National Security Services (SAP NS2).

Sovereign cloud customers

Outside the U.S., the SAP Sovereign Cloud Services organization already counts more than 170 customers globally and has plans to invest a further €2 billion over the next decade to expand regional coverage. For example, SAP is currently in talks with four Asian countries. In Germany, the unit provides secure sovereign cloud services through Delos Cloud and plans to launch similar services in France through Bleu.

Instead of getting involved in a futile race to catch up with the U.S., SAP executives argue that Europe must now promote the use of vertical AI for individual industries and special areas of application.

In a recent guest commentary in the German business newspaper Handelsblatt, Klein called for a digital strategy for Europe that builds on the region’s digital strengths: “A new, European-defined concept of sovereignty is necessary, one that relies on self-determination rather than self-sufficiency.” He also cautioned that digital sovereignty “is not an end in itself” and called for “profound change” to industry business models.

These models “need to be rethought, processes digitized, and AI used in a targeted manner for more innovation, for greater efficiency, for sustainability,” he added. 

Martin Merz, president SAP Sovereign Cloud, agrees. “The debate around digital sovereignty in Europe has gone on too long with too many buzzwords and too little substance,” he said. “We’ve reached a point where Europe can no longer afford misguided discussions. What counts is value creation. Real sovereignty includes empowering people, industries, and governments to lead through innovation.”

“When it comes to highly sensitive data, SAP Sovereign Cloud comes in,” Merz continued. “It’s purpose-built to protect the most sensitive, security-critical data, enabling the highest level of protection and operational autonomy, without slowing down innovation.”

Locally hosted AI

Underscoring this shift in the data sovereignty debate, many SAP customers are now talking about sovereign AI or what SAP calls “locally hosted AI.” To help facilitate this, SAP CTO Philipp Herzig recently noted that the company is now offering a range of self-hosted AI models in a more secure and local environment. “Starting Q3 this year, we are providing the entire AI foundation end-to-end out of European data centers. This is AI fully managed and operated by SAP,” he shared.

As a result, he said, customers will have access to cutting-edge local models like Mistral Small and Mistral Medium, Aleph Alpha, or the T-Free model used by the German government. “Their data will remain local, trusted, compliant, and secure, and seamlessly integrate with SAP Business AI capabilities without compromising on performance, governance, or privacy,” Herzig added.

He also revealed that Swiss Federal Railways is leading the way as an early adopter, using locally hosted AI with Mistral AI to power innovation in a trusted environment. Speaking during a recent NVIDIA conference in France, he also announced that SAP has formed a strategic partnership with Mistral AI and Capgemini to accelerate AI adoption across Europe.

“Together, we’re building the future of enterprise AI – secure, local, and smart,” Herzig said.

A garden center and plant nursery may seem like a seasonal business, but Merrifield Garden Center is continuously evolving to meet the needs of its customers no matter the time of year.

Since its humble beginnings in 1971, Merrifield has flourished into one of the largest full-service garden center, nursery, and landscaping companies in its region, employing more than 600 individuals and comprising over 70 acres of plants, property, and storefront in northern Virginia. Its business includes three brick-and-mortar locations carrying plants, gardening supplies, and home and holiday décor; an online store; a wholesale division that supports other local landscape contractors; a materials production division that recycles materials from landscaping jobs; and a line of private-label products tailored specifically for the environmental conditions in the greater Washington, D.C. area.

Clearly, the business has expanded and evolved over the years to meet changing industry and customer standards, but its founding principles of providing the highest quality customer services and unparalleled plant and product selection remain steadfast. The same is true for the systems supporting the products and services in Merrifield’s retail operations. With its omnichannel strategy, it’s critical that Merrifield delivers a consistent, seamless, and personalized experience across all its customer touchpoints.

Blooming into a modern, tech-savvy enterprise

Luckily, CFO Lynn Warhurst has made it one of her personal goals to bring technology into the company since joining in 1978. “There was zero technology…so we knew going forward that if we wanted to grow and be successful, we needed to change something,” she said.

After coming across SAP at an NRF event in the early 2000s, Merrifield went live with SAP ERP Central Component (SAP ECC) in 2013 to replace its 20-year-old garden center legacy system, providing the company with modern audit trail capabilities and increased data reliability.

Continuing its long-standing innovation journey and partnership with SAP, Merrifield is now transitioning its SAP ECC system to the cloud with SAP S/4HANA Cloud Public Edition, retail, fashion, and vertical business.

Merrifield Garden Center sees up to 300 transactions per hour per location, Warhurst said, and so the company needed a solution with enhanced processing speeds that can handle a high volume of retail transactions. What’s more, the company also wanted a system that supports Apple Pay and Google Pay, has customer loyalty tracking and data analytics capabilities, and ensures enterprise security and compliance.

Merrifield also wanted to bring together its retail and wholesale divisions onto one platform as opposed to hosting them on fragmented solutions. “We knew [SAP S/4HANA Cloud Public Edition] could handle our complexity and give us the detail we needed to run and grow our business,” Warhurst said. “After 54 years in business, both divisions will run on the same platform. It’s very exciting that we can interchange cashiers for retail and wholesale, which means being more efficient as a company.”

SAP S/4HANA Cloud Public Edition, retail, fashion, and vertical business is a new solution introduced in January of this year. Built specifically for retailers, the ERP solution is tailored to the industry’s unique complexities around scaling, merchandising, store operations, and supply chains. The flexibility of its public cloud architecture helps unify and integrate industry-specific processes with out-of-the-box integrations.

Merrifield is also implementing SAP Omnichannel Sales Transfer and Audit to help ensure the completeness of sales transactions across multiple channels, improve data reporting, and comply with local regulations.

Strong partnerships build a foundation for success

To facilitate its cloud transformation, Merrifield engaged Syntax as its implementation partner. “Having a trusted partner is very important,” Warhurst said, explaining that Merrifield has worked with Syntax since 2018.

For the move to SAP S/4HANA Cloud Public Edition, retail, fashion, and vertical business, Syntax came on-site to Merrifield to experience its current system first-hand and better understand what the business sees as mission-critical during this transformation, Warhurst said. Together, they identified solution provisioning and integration, data migration, and business continuity as priorities. With this insight, Syntax is working with SAP to integrate any remaining project gaps into an upcoming solution release in August.

“Syntax and SAP have been great. We are one of the first to go public cloud for retail and they have been there for us,” Warhurst said. “It was very important to find somebody who believed in us and was there for us, and I feel that that’s really one of the most important things for our success.”

While the new system is projected to go live in September, the project is currently in the configuration and realization stage and Merrifield is excited for the future. Adopting this holistic, omnichannel, cloud-based solution will help the garden center achieve its goals of expanding into more locations and online offerings by having trusted, complete data from across its divisions available in one place.

Gillian Hixson is an integrated communications specialist at SAP.

Top image courtesy of SAP employee Tom Lennart-Krupp.

In the second quarter of 2025, SAP demonstrated significant momentum in the Americas. Organizations across the region and industries are continually recognizing SAP as a premier partner for driving transformation and strategic initiatives. 

SAP’s commitment to investing in innovation is delivering growth and value to organizations across the region. Thousands of companies continue to place their trust in SAP to propel their digital journeys, evident in the rising adoption SAP Business Suite and SAP Business AI, which are redefining how work is done and processes are streamlined. Businesses are increasingly implementing AI agents to automate complex tasks, freeing up valuable time and resources for innovation and growth. 

Accompanying this transformative shift is the importance of SAP Business Data Cloud, which integrates both SAP and non-SAP data. This enhanced visibility and informed decision-making capability are crucial for driving effective business outcomes and maintaining a competitive edge. 

In the second quarter, organizations that selected SAP Business Data Cloud include Acron Aviation, which also selected SAP Business AI and SAP Cloud ERP Private, Brown-Forman, and NEBCO, which also selected SAP Cloud ERP. 

Coming off our partnership announcements at SAP Sapphire and Adobe Summit, in Q2 Adobe selected SAP Signavio, SAP Business Data Cloud, and expanded its WalkMe footprint for an enterprise-wide adoption. 

Meanwhile, companies across the Americas are continually embracing RISE with SAP Methodology, leveraging SAP Cloud ERP Private to drive their digital transformations. Companies that embarked on this journey during the second quarter include: 

• LEROY MERLIN Brasil, is the largest retail chain for home improvement, present in 14 states with 55 stores. The company is renowned for its significant investments in innovation and sustainability, and it stands as SAP’s largest retail customer in the country. To drive innovation, embrace AI, and build a resilient supply chain amid the fast-paced retail industry, LEROY MERLIN has migrated to SAP Cloud ERP Private.  
• Mannington Mills, a fifth-generation family-owned leading manufacturer of fine flooring, selected SAP Cloud ERP Private, SAP Business AI, and SAP SuccessFactors to streamline business operations and further improve productivity. 
• Iochpe-Maxion, a Brazilian multinational, is a global leader in automotive wheel production and a major manufacturer of automotive structural components in the Americas. With operations spanning Maxion Wheels and Maxion Structural Components in the automotive sector, and AmstedMaxion in the railway sector, the company produces around 50 million wheels annually. To boost its technological infrastructure and further streamline global operations, Iochpe-Maxion strategically migrated its existing SAP S/4HANA to SAP Cloud ERP Private  
• Mega Alimentos, the prominent Mexican company with over three decades of experience in the candy, sauce, and chamoy industry, including its iconic brand “La Botanera,” has embarked on the path of RISE with SAP with SAP Cloud ERP Private as part of its commitment to digital transformation. 
• Transpire Bio is a U.S.-based, clinical-stage biopharmaceutical company developing inhaled drug-device combination products for serious diseases where therapeutic options are significantly lacking. The company selected SAP Cloud ERP Private to track its revenue, streamline operations, and prepare for growth as they bring their pipeline of inhaled therapies to market. 

Other organizations that chose SAP in the second quarter include Gardner White, which selected SAP Cloud ERP and SAP Business AI, and Delta, a leading global airline that served more than 200 million customers in 2024. The airline selected SAP Supply Chain Management solutions to help boost logistics visibility, ensure better process controls, and effectively manage freight costs.  

As we look ahead, we are committed to empowering our customers to achieve more than ever before. We’re continuing to invest in the innovations that will deliver growth, value, and success to our customers around the world.

Indeed, SAP is helping businesses lead the way into the future.

Jan Gilg is CRO, president of SAP Americas & Global Business Suite, and a member of the Extended Board of SAP SE.

Matthias Medert is global head of Sustainability at SAP. Here, he speaks about key aspects of the company’s long-term resilience plans and the challenges along the way. In the interview, he also discusses a new partnership to advance SAP’s commitment of achieving net-zero greenhouse gas (GHG) emissions by 2030 and beyond.

Q: How does SAP view sustainability within its overall business strategy?

A: Sustainability is a core element of business strategy and deeply embedded in our vision to help the world run better and improve people’s lives. This means it is not a separate initiative, but an integral part of our leadership and long-term goals as a company. And as such, sustainability is a business catalyst and value driver.

What does SAP’s commitment to reach net-zero GHG emissions by 2030 mean in practice?

We recognize that with a customer base that generates 84 percent of the total global commerce, we have the responsibility and opportunity to lead in corporate climate action efforts. This isn’t just about reporting numbers; it’s a science-based transformation that is embedded in our operations, collaboration with suppliers, technology, and what we offer to our customers.

For us, it means our strategy aligns with the 1.5°C pathway set in the Paris Agreement. We aim to reduce gross GHG emissions by 90 percent across our relevant value chain (market-based). The remaining emissions — no more than 10 percent — will be neutralized through high-quality, verified carbon removal projects. Our reduction efforts have earned SAP’s inclusion in the EU Paris-Aligned Benchmarks, which gives climate-conscious investors confidence in our approach.

What does SAP’s decarbonization strategy consist of?

Our transformation is structured around four interconnected pillars:

With cloud transformation, we’re accelerating the shift from on-premise to cloud solutions, with SAP-managed data centers already powered by 100 percent renewable electricity. In parallel, we are collaborating with hyperscalers and our customers to push renewable electricity adoption upstream and downstream. An important part of this transition is enhancing GHG accounting and moving from estimates to primary data from our suppliers.

With upstream supply chain engagement, we are revising procurement policies and working closely with our suppliers to lower emissions across the supply chain. This includes aligning on data transparency and decarbonization targets. The rise of energy-intensive technologies like AI presents new challenges, but we’re addressing them through joint commitments and shared accountability.

In internal operations, we have several initiatives in place. For instance, since 2014 SAP has been running all offices, owned data centers, and co-locations on 100 percent renewable electricity. In addition to this, we are electrifying our vehicle fleet, and we have an internal carbon pricing scheme for business flights in place. The generated funds are invested in projects that have a positive impact on local and global populations as well as climate and biodiversity.

To neutralize SAP’s residual emissions that remain beyond 2030 after all feasible reduction efforts, we are investing in high-integrity carbon removals, ranging from nature-based to engineered solutions. Great examples of this are our long-term investments in the Livelihoods Carbon Funds and Climeworks’ Direct Air Capture solutions. The partnership with Climeworks marks a significant milestone for SAP and our commitment to durable carbon removals. Additionally, we make annual contributions to climate finance. The voluntary investments made during our transition to net-zero allow us to take responsibility for our emissions, increase our overall impact beyond our own decarbonization efforts, and help the world keep their climate targets in reach.

Where does the partnership with Climeworks fit into your strategy?

We have entered an agreement with Climeworks to secure 37,000 tons of high-quality carbon removal credits through 2034. This includes technologies like direct air capture, biochar, and enhanced rock weathering. More than just a carbon removal purchase, this is a strategic innovation partnership.

Together, we are co-creating ERP-centric carbon management tools, integrated into solutions like SAP Sustainability Control Tower, and making it available via SAP Store. These tools will help companies manage and mitigate emissions in real time, making carbon removal more actionable at scale.

Is Climeworks also adopting SAP solutions?

Yes, and that is part of what makes this partnership so compelling. Climeworks has implemented SAP S/4HANA Public Cloud through the GROW with SAP journey and is using the SAP LeanIX portfolio to support its rapid growth. These tools help with compliance, financial management, and operational efficiency — all critical elements for scaling in the climate-tech space.

How does this alliance benefit SAP’s business and customers?

It is a strategic move that strengthens our position economically and environmentally. As SAP Chief Sustainability & Commercial Officer Sophia Mendelsohn recently shared, this partnership allows us to lock in carbon removal capacity at preferred rates, hedging against future price volatility. But more importantly, it enables us to create new sustainability-focused solutions for our customers, helping them meet regulatory and stakeholder expectations.

As SAP pushes ahead with its decarbonization strategy, where do you see the biggest opportunities for positive impact, both within SAP and for the broader ecosystem?

As SAP advances its decarbonization strategy, the biggest opportunities for positive impact lie in leveraging our technology and ecosystem to drive systemic change — both internally and across industries.

Within SAP, our greatest opportunity is embedding sustainability directly into core business processes — such as procurement, supply chain, and finance — using our own solutions. This not only reduces our operational GHG footprint but serves as a model for our customers. Our sustainability solutions aim to empower organizations to measure, manage, and act on their sustainability goals. By doing so, we scale our impact.

We remain grounded in the Science-Based Targets Initiative (SBTi) Corporate Net-Zero Standard and see opportunities to lead by example, even beyond 2030, by continuously improving our net-zero program and sharing best practices.

In the end, we are not just preparing for a net-zero future; we are shaping it. Through collaboration, transparency, and technology, we are proving that climate action is essential to long-term success.

Karen Restrepo Avila is Sustainability and Net-Zero communications lead at SAP.