Data sovereignty is a critical consideration for businesses that process, analyze, and store data. Different countries have different rules about where and how data can be stored and processed, which means businesses need to consider their hosting options carefully to avoid any legal risks or complications.
In this article, we’ll explore what data sovereignty is and the key factors to consider when choosing a hosting provider. The considerations include compliance with local laws such as GDPR (General Data Protection Regulation) in the EU and U.S. CLOUD Act in the United States, as well as data security and cost-efficiency.
What Is Data Sovereignty?
Data sovereignty is the legal framework that governs data and depends on the country in which it is stored. Governments enforce these data regulations to protect user privacy, maintain security, and ensure that businesses operating within their borders follow their laws.
Some businesses mistakenly assume that using cloud storage means that their data exists in an abstract, non-existent place. In reality, cloud providers store data in physical data centers, which are large facilities filled with servers located in specific countries.
When a business chooses a cloud provider, it is therefore also choosing a hosting location and which country’s laws will apply. This legal and operational implication makes choosing the right data storage host and location a very important business decision to make, especially for businesses that handle sensitive information.
Why Countries Enforce Data Sovereignty Laws
Governments enforce data sovereignty rules for a few key reasons:
- Privacy Protection: To regulate how businesses store and process personal data so that sensitive data is safeguarded.
- National Security: To store data locally so that unauthorized foreign access is prevented.
- Economic Interests: To keep data within national borders so that local businesses and industries can be supported.
- Legal Compliance: To ensure that businesses storing data within their jurisdiction are following the national laws and regulations.
For example, the GDPR is Europe’s data privacy and security law, which is considered to be the strictest in the world. This law heavily restricts data transfers to countries that do not meet its requirements. Meanwhile, the United States CLOUD Act allows the U.S. government to access data stored by American businesses – even if the data is kept in another country.
These differences can pose a significant challenge to businesses that operate internationally. Failure to comply with local regulations may result in data access restrictions, penalties and fines, or forced withdrawal from that region’s market.
Key Considerations When Choosing a Hosting Location
Selecting a data storage location is not just about price and speed. Businesses also need to think about legal risks, security, and performance.
Here are some main factors to consider:
1. Compliance With Local Regulations
Choosing the right data hosting location should begin with the most important step: checking and understanding the local laws.
For example:
- A business operating in Europe should store data in an EU-based data center to comply with GDPR.
- A U.S.-based business handling healthcare data must choose a provider that meets HIPAA (Health Insurance Portability and Accountability Act)
Some countries, like Switzerland and Canada, have stricter privacy laws, while others allow more freedom and government access to stored data. Understanding these differences ensures compliance.
2. Data Security and Encryption
No matter where the data is stored, security should be a priority. A good hosting provider should offer strong protections against unauthorized access to data, including:
- Encryption: The ‘scrambling’ of data so only authorized users can read it.
- Access Controls: Includes strong login protections like multi-factor authentication.
- Backups: Data is copied and safely stored in case of a cyberattack or system failure.
- Regular Security Audits: Helps identify vulnerabilities and maintain compliance.
If a provider does not offer these protections, there is a real risk that data may become exposed to hackers. Businesses that handle sensitive data should, therefore, choose host providers with ISO 27001 or SOC 2 certifications, which indicate good compliance with global best practices.
3. Legal Risks and Government Access
Some countries allow their governments more freedom when accessing stored data. Businesses should be aware of this and should avoid hosting in countries with broad government surveillance powers.
For example:
- The U.S. CLOUD Act allows the U.S. government to access data stored by American businesses, regardless of where the servers are located.
- China’s cybersecurity laws require businesses to store certain types of data within China, making it easily accessible to local authorities.
Businesses handling highly sensitive data may prefer hosting in countries with stronger protection laws, like Germany or Switzerland.
4. Performance and Cost Efficiency
Data-storing considerations should also factor in performance and cost. The location of a hosting provider affects data access speeds, and storing data in a highly regulated location may be expensive.
Businesses should weigh the compliance costs against the risks of non-compliance, since the fines for violating GDPR, as an example, can be up to €20 million or 4% of annual revenue.
Staying Secure and Connected Across Borders
For businesses that operate across multiple countries, staying online should be a priority. Traveling to the EU? An eSIM Europe plan will allow you to stay connected and secure. It offers benefits like:
- Secure, encrypted internet connections to protect business data while on the go.
- Avoidance of public Wi-Fi, which can expose sensitive data to cyber threats.
- Ensuring compliance by making sure data transfers stay within the allowed locations.
Choosing the Right Hosting Provider
Selecting the best host provider is a critical business decision that impacts compliance, security, and operational efficiency. Before choosing a provider, businesses should ask:
- Are the data laws in this location compatible with my compliance requirements?
- Will my data be safe from government access and unauthorized users?
- Will storing my data here impact operational performance and cost?
Balancing all these considerations is no easy feat, but when done well, a business can ensure both compliance and efficiency. In the spirit of making informed decisions on essential remote tools, the same critical thinking applies to connectivity; resources dedicated to finding the best eSIM options can help teams maintain their secure, compliant workflows regardless of where in the world they are working.