Application, platform, infrastructure and services each follow their own dynamics. IDC analysts Ewa Zborowska and Carla Arend explain where European demand is heading and how vendors can position for it.
Europe’s AI market is worth $105 billion, and customers are busy building their own AI stack, layer by layer, reshaping each one as they go. For vendors, the interesting question is not whether this market will grow, but where exactly the money is heading in the AI stack and how to position for it.
That was the topic of a recent webinar, where Ewa Zborowska and Carla Arend looked at AI deployments in the cloud versus on-premises, which AI platforms are winning and why, how the application layer is being reshaped, and whether AI sovereignty is realistic.
AI Application Layer: Embedded AI and Outcome-Based Selling
AI adoption has moved well past the pilot stage, and the application layer is changing first. Customers increasingly want AI as a feature of the software they already own rather than as a standalone product, alongside targeted investments in specific use cases. As buyers struggle to prove the return on AI, vendors will need to sell the outcome rather than the model, and embed AI features in the workflows customers already run.
AI Platforms and Agentic Architectures: The Fastest-Growing Layer
The fastest-growing part of the stack sits one layer below, in AI platforms and developer tooling. This layer decides which models, data and guardrails an enterprise can use at all, and it is being transformed by agentic architectures, where multi-component builds replace single-model integrations. The vendors who land the agentic build early have the chance to own the runtime, and to hold on to it through data gravity and governance. Customers will not settle on a single platform, which makes that early position even more valuable.
AI Infrastructure and Sovereignty: Cloud, On-Premises or Both?
Infrastructure tells a different story from the one many expect. In addition to the constraint imposed by raw GPU supply shortages, locality and energy supply increasingly play a role, so the title question has a clear answer: AI will not live in the public cloud alone. Customers will choose a mix of deployments that reflects where their data must sit and what power is available. Vendors competing here will do better selling sovereign capacity and efficiency than selling price per unit of compute. Sovereignty itself is turning from a debate into a deployment, yet there is still no single definition of it. Vendors may label AI as sovereign, but it is the customers who decide what that actually requires, and we will look at what that means for cloud providers, telcos and anyone selling into sovereign requirements.
AI Services: Getting Customers from Pilot to Production
Running across every layer are services, because few buyers get from pilot to production alone, and that is exactly where adoption tends to stall. Automation is also resetting expectations, with buyers now looking for the same work faster and cheaper. Services providers who lead with fast, automated delivery, price on outcomes and SLAs, and keep customers through governance and managed AI operations will be best placed.
What This Means for Vendors in the European AI Market
Across all of this there is opportunity at every layer, and every layer has its own dynamics. Vendors who understand those dynamics will be much better placed to grow.
If you missed our recent webinar The European AI Stack, the on-demand recording takes you through every layer in detail, including what AI sovereignty means for cloud providers and telcos. Watch it at any time here.
For your go-to-market planning, our new IDC playbook tests six common assumptions about the European AI market, from market size to buyer behaviour, against European data and sets out what to do differently. Download the eBook here.