A new report by market intelligence firm IDC has predicted a significant increase in the use of sovereign clouds by governments in the Asia Pacific region due to geopolitical tensions and data privacy regulations.
The report indicates that over one-third of APAC government bodies plan to adopt sovereign cloud technology by 2026. This decision stems from concerns about cyber threats, shifting data residency regulations, and the critical matter of data security.
“Governments also view the sovereign cloud as an economical advantage, attracting hyperscaler investments into local data centers to boost the digital economy and industrial prospects,” according to the report.
IDC clarifies the concept of a sovereign cloud as a subcategory of digital sovereignty. That is, “an architectural design equipped to adhere to a country’s data residency, sovereignty regulations, and auditing requirements.”
The report highlighted that 17% of APAC governments already use sovereign clouds and one-third intend to adopt sovereign clouds in the next two years. This underscores the growing interest in sovereign cloud in the region, the report said.
Moreover, “33% of APAC governments are evaluating the feasibility of these solutions but have not finalized their decisions yet,” IDC said in an eBook prepared based on the report.
According to another research by Capgemini, in Australia alone, 64% of organizations are actively investigating a sovereign cloud strategy, compared to 52% globally.
Though there is a notable surge in interest for sovereign cloud adoption by tightly regulated sectors including the public sector, the trend is not limited to them, said Ravikant Sharma, research director for government insights at IDC Asia/Pacific.
“This trend extends to related industries affected by policies centered around sovereignty, like utilities and healthcare,” Sharma said. “These sectors are proactively preparing for potential shifts in regulations and government policies, especially concerning data residency requirements.”
Global spending on sovereign cloud solutions is expected to surpass $250 billion by 2027, according to IDC. The report noted that major cloud providers such as AWS, Google Cloud, and Microsoft Azure are actively expanding their offerings to meet the growing APAC sovereign cloud demand.
“Three hyperscalers (namely AWS, Google Cloud, and Microsoft Azure) consistently adapt their sovereign cloud solutions, adding more features to enhance their appeal to government entities,” IDC said in the eBook.
These providers are customizing their services to meet the specific requirements of the governments in these regions, such as offering dedicated data centers and implementing robust security measures.
Yet adoption is not without its obstacles, the report points out. “Despite this, APAC governments face considerable difficulties such as elevated setup costs, intricacy, concerns about security, and potential limitations on innovation.”
“Productive adoption requires the prioritization of investments, the categorization of data, and the alignment of trust with organizational objectives. It is essential for vendors to inform in depth and provide pragmatic solutions for efficacious sovereign cloud implementation,” remarked IDC’s Sharma.
APAC region’s organizations are contemplating the adoption of sovereign cloud owing to the “assumed advantages it provides,” according to Sharma. He stated that the primary factor is data protection and privacy. “This concern is intricately linked with the aspiration to be prepared for future data-driven business innovation, which is identified as the second most substantial expected benefit.”
The adoption rate of the cloud by APAC public organizations “will differ from country to country,” as per the IDC’s report. “However, on the whole, the sector lags other sectors, with three-quarters still recognizing their maturity as ad hoc or opportunistic, compared with half of the remaining industries.”
Sharma denotes another notable concern as the “potential effect on the pace of innovation.” He revealed that 36% of digital innovation teams and business departments are worried that the introduction of a sovereign cloud might stifle innovation by slowing down operations. This apprehension, he further elaborated, stems from the value placed on cross-industry and cross-border data movements, which are considered “vital for boosting innovation.”
Given the intricate interplay of geopolitical tensions, data sovereignty, and economic advancement, the APAC governments are on a path that will lead to a significant increase in the adoption of sovereign clouds, shaping the trajectory of the region’s digital economy. Sharma laid stress on the significance of forging strong collaborations with trustworthy and competitive organizations to navigate this progressively evolving landscape successfully. Such a strategy, according to him, allows companies to withstand the changes and maintain their relevance over time.