Propelling his fortune through the sale of everyday essentials such as bread and butter at fiercely competitive prices, has rendered Dieter Schwarz one of the wealthiest individuals across Europe. The 84-year-old, recognised as the progenitor of discount retailer Lidl, has accumulated personal riches of approximately €40 billion, as per Manager Magazin’s reports. However, Schwarz has now ventured into a diverse, but equally significant pillar of contemporary society: data services.
After establishing an in-house mechanism in 2021, the Schwarz Group, led by Lidl’s proprietor, has extended its services to provide cloud computing and cyber security solutions to business consumers. The Schwarz Digits IT segment, restructured as a separate operational department in 2023, boasts an impressive clientele including Germany’s eminent software conglomerate SAP, the nationally celebrated football team Bayern Munich, and the port of Hamburg. The division yielded a commendable €1.9 billion in sales revenue in the previous year, whilst maintaining a workforce of 7,500 employees. Christian Müller, the joint managing director of Schwarz Digits, revealed to the Financial Times that the company’s initial objective was primarily to meet its own requirements, rather than commercial aspirations. He acknowledged the company’s remarkable trajectory of rapid growth.
The firm’s key selling proposition assures clients that their data is processed and retained exclusively within Germany and Austria, countries that strictly adhere to privacy and data safeguarding stipulations. The Schwarz business enterprise, a privately owned entity reporting €167.2 billion in yearly turnover, initially grappled with the predicament of data storage solutions and was reluctant to rely on external platforms. Müller stated that if a German provider were unavailable, the company aimed to engage at least a European service to avert data storage in foreign territories. After determining that none of the existing suppliers could fulfil its demands, the company resolved to design its standalone cloud network.
Abundant confidential data, such as individual store sales trends, pricing algorithms, records from Lidl’s customer loyalty scheme, and particulars of the corporation’s 575,000 employees, had to be securely managed, Müller stated. Upon installing its private cloud service, Lidl realised that several other German enterprises were grappling with the same concerns of whether to utilise dominant cloud services originating from the US and China.
Professor Johannes Helbig, a specialist in digital sovereignty at the University of Erlangen-Nuremberg, underscored the importance of Europe being at the cutting edge of IT services, and praised Schwarz Group’s endeavours as critical and well-received, calling their approach an inspiring exemplar.
The principal condition for interviewing at the IT nerve centre of Schwarz Group, located in the sizable headquarters, is the withholding of any specific location details. The corporation is concerned about the safety of the hub, crucial to the functioning of its 14,000 Lidl and Kaufland stores worldwide, along with 220 warehouses and an increasing quantity of factories producing assorted goods such as drinking water, pasta and ice cream.
Before one can enter the facility, all mobiles and electronic gadgets must be secured in an external locker. Access to the premises is managed by on-site staff and a gateway controlled via palm vein scanning. Known for its aversion to publicity, the company only recently began to recruit media relations personnel.
Schwarz Group is nestled on the periphery of Neckarsulm, a modest town with a population of 27,000 in Germany’s affluent southwest. In recent times, it has gradually become more transparent. It currently sponsors the Lidl-Trek Tour de France cycling team and participated prominently in the 2024 Euro football championship, with the young mascots sporting Lidl-branded attire.
Joining the technological rat race, Schwarz Group forayed into artificial intelligence last year, purchasing a minority share in German AI startup Aleph Alpha. Owner Dieter Schwarz is seizing this chance to further objectives within this rapidly evolving technology sector. His philanthropic foundation, in collaboration with the company’s home state of Baden-Württemberg, is funneling resources into an AI campus in Heilbronn. The proposed campus, partnering with Aleph Alpha, envisages becoming a worldwide hub for practical AI applications.
Schwarz Digits’ emphasis on cloud technology, AI and cyber security was deliberate and strategically sound, reasoned Axel Oppermann, the proprietor of Avispador, a German IT consultant company. These fields, Oppermann noted, held high relevance for clientele. The magnitude and financial robustness of Schwarz Digits make it a more appealing prospect to potential clients seeking an IT partnership with longevity, he further added.
Despite Schwarz Digits’ growth as a legitimate regional competitor to significant players like Amazon Web Services, Google, and Microsoft, Oppermann noted the company was at a competitive setback due to the absence of a vast external service partner network, which markets cloud products and assists with the deployment and administration of services. For instance, Amazon Web Services boasts a partnership network of 130,000 partners across 200 nations.
However, Schwarz Digits is recognised as a favourable alternative for regional firms emphasising data security and sovereignty. Bayern Munich commented to the FT that Schwarz Digits’ concentration on data security and privacy was prominent and unmatched in the market, making it their choice for digital sovereignty.
Schwarz Digits maintains its focus on security and privacy in its application of external AI and cloud computing. Notably, the company’s investment in cybersecurity products has impressed software giant SAP, which became a patron in 2023. SAP praised the Schwarz cybersecurity platform for providing an attacker’s viewpoint of their IT systems – a key advantage in identifying vulnerabilities and analysing potential threats.
Schwarz Digits ascended to this level of expertise in 2021 when it acquired Israeli cybersecurity firm XM Cyber for $700mn. Initially, their intention was simply to join as a customer, but with XM Cyber contemplating a public listing and the potential departure of critical personnel, the firm decided to incorporate the entire company.
Regarded as a natural progression in extending its technological skills, Schwarz Digits made an investment commitment when AI firm Aleph Alpha raised over €100mn in additional equity. Reflecting its approach to cloud computing, Schwarz Digits’ approach to external AI also adheres to a cautious approach to security and privacy.
The corporation recognises the pivotal role of advancing technologies, but remains cautious about the application of its proprietary data on AI platforms outside its jurisdiction. As Müller puts it, “we aimed to avoid such pitfall.” Thus, from the very first day of launching the chatbot, ChatGPT, they have prohibited staff access. – All rights reserved, 2024 The Financial Times Limited.