Cloud Strategy Reevaluation: Should Data Sovereignty Guide Your Decisions?

In the digital age, data sovereignty has become a significant concern for many nations. Countries across the globe, including members of the European Union, have introduced laws to emphasize data sovereignty, requiring cloud providers to comply with regulations like the GDPR and enable data control features such as encryption and access restrictions. Initiatives like Gaia-X promote sovereign European cloud strategies with technical requirements for data encryption and regulatory compliance.

This focus on sovereign cloud strategies is not limited to Europe. Vietnam, Russia, and Indonesia, for instance, mandate that citizen data be stored on servers within their respective countries. Similarly, China requires public sector institutions to use a Chinese cloud provider for data storage. Even in the US, states like California have implemented GDPR-inspired regulations, and the country also has industry-specific federal protection laws such as the HIPAA Privacy Rule.

The emergence of sovereign clouds as another option significantly increases complexity, both in terms of workload placement and ongoing management. However, the adoption of sovereign clouds should not hamper innovation and digital transformation initiatives. In fact, by 2027, 70% of enterprises adopting generative AI will consider digital sovereignty a top concern when selecting a provider, according to Gartner, Inc.

The sovereign cloud market is emerging with concrete, comprehensive, and sustainable implementations. A sovereign cloud can be made available to multiple clients on a single public cloud infrastructure and provide the same set of services as public cloud. The rise of sovereign clouds is expected to carry a small premium (15-20%), but the value of sovereign clouds goes hand-in-hand with affordability.

Data sovereignty laws have been increasing worldwide to keep citizens' data within sovereign borders. These laws are a response to various factors, including privacy scandals, economic competition, cyberwarfare, and the US CLOUD Act. To ensure compliance, sovereign clouds must safeguard data and enable its management according to applicable laws and regulations, but this cannot be an obstacle to data sharing.

Notable examples of data protection laws include the European Union's GDPR, which regulates the transfer of data outside the EU, and France's SecNumCloud, a certification scheme that grants cloud infrastructures a security certification aligned with GDPR and ISO 27001 standards, and also protects against extraterritoriality rules.

When developing a cloud strategy, it's critical to address the requirements of the four pillars of sovereign cloud and assess how the tradeoffs will impact specific business priorities. In the second installment of this series, we will take a look at how organizations can adopt the right approach to implementing sovereign cloud.

Stay tuned for more insights on the evolving landscape of sovereign clouds and their impact on digital transformation.