Sovereign cloud: geopolitics, regulation and economics

In recent months, the issue of sovereign cloud has been catapulted to the forefront of business thinking. What was once a relatively fringe topic of discussion confined to the tech industry is quickly becoming a growing business imperative. Fortune Business Insights forecasts the sovereign cloud market will expand from approximately $154.69 billion in 2025 to $823.91 billion by 2032 – a compound annual growth rate (CAGR) of close to 27%.

 

At its core, the sovereign cloud debate revolves around organisations taking control of their most valuable asset – their data. The digital economy thrives on it, from powering critical national infrastructure to enabling personalised citizen services and driving economic growth. Hosting data in the cloud offers flexibility and the opportunity to innovate. But with the world’s three largest cloud providers all based in the US, true sovereignty can be a grey area. Whilst these cloud giants might host data outside the US, the scope for it to cross borders is an issue, with complex geopolitical, regulatory and economic nuances pushing organisations to reconsider where they’re storing data.

 

 

External factors fanning the flames

The geopolitical landscape has certainly played a role in driving the sovereign cloud debate. Changing relationships between countries – often triggered by new administrations, policy shifts or major events such as Brexit – directly influence how organisations work with global cloud providers. As we have seen, trade agreements can be rewritten overnight with little warning.

 

Regulation is another major force shaping the sovereign cloud agenda. Over the past two years, a wave of new and updated legislation has reshaped expectations around how data is stored, accessed and protected. The EU Data Act, EU data protection laws, sector-specific rules such as PCI DSS, MiFID II, Basel III/IV and DORA, and the UK’s Data (Use and Access) Act are just a few examples.

 

These frameworks are designed to strengthen data governance by setting clear baseline requirements. But when data moves across borders, organisations risk breaching these obligations. Regulators have shown they are willing to issue fines and pursue compliance failures, and the reputational impact can be just as damaging as the financial one.

 

Economic independence and innovation are also shaping the sovereign cloud conversation. National economies differ widely in their resilience and growth trajectories, a trend heightened since the COVID-19 pandemic. Each country has its own priorities and productivity goals, and many are turning to technology to drive progress. As part of this, governments are increasingly focused on reducing reliance on foreign companies and building domestic technology ecosystems. Cloud infrastructure is a central component of that effort, helping to drive value, support local providers and generate skilled jobs that contribute directly to long-term economic stimulation.

 

These three factors are driving organisations to consider where their data is hosted. Locations that are secure, cost-effective and economically viable today may become a liability tomorrow. Sovereign cloud offers a solution to this uncertainty by ensuring data is stored and processed within defined national or regional borders. This approach reduces exposure to risk, supports regulatory compliance and gives organisations greater long-term confidence in how their data is protected, regardless of changes to geopolitics, legislation and the economy.

 

 

Building a legal and technical shield

But whilst sovereign cloud provides legal and technical protection, moving data and workloads from existing cloud environments to a sovereign one presents another challenge for organisations. There are technical, operational and strategic barriers that mean a simple lift and shift of services simply isn’t possible.

 

Here, a modern data architecture underpinned by a unified data platform can play a vital role in the success of sovereign cloud initiatives. This ensures robust data management, security and governance – including encryption and audit trails – across any environment, enabling organisations to meet strict sovereignty environments.

 

This model also gives organisations the flexibility to place and move data as required. Not every dataset or workload needs to reside in a sovereign cloud. Highly sensitive information, such as personal or banking details, may be better suited to on-premises environments or sovereign cloud infrastructure, while less critical datasets can remain in a standard, public cloud environment. The key is ensuring organisations have genuine choice and freedom over where their data sits, and the ability to shift it to the most appropriate environment as needs change.

 

 

Freedom at a cost

Geopolitical, regulatory and economic issues are typically resolved slowly and are often outside of an organisation’s sphere of influence. Moving to a sovereign cloud can help to make organisations more resilient to outside forces, but this freedom can come at a technical cost.

 

With hyperscalers now investing heavily in sovereign cloud offerings, organisations stand to benefit from greater choice. Those able to overcome the technical hurdles and migrate early will gain stronger control over their data, while avoiding unnecessary costs and compliance headaches along the way.

 

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Wim Stoop is Senior Director at Cloudera

 

Main image courtesy of iStockPhoto.com and imaginima