What is digital sovereignty and why it matters

The digitisation of everything has reshaped how we live and especially how we do business. However, the unrivalled convenience and connection raises questions around who really controls an organisation’s digital assets. As cyber threats escalate and data privacy regulations tighten to accommodate, the question of digital autonomy has moved from IT departments to boardrooms to address a new business imperative: digital sovereignty. This growing focus on data sovereignty and digital autonomy reflects a fundamental shift in how organisations must protect and control their digital assets.

So, what is digital sovereignty?

Digital sovereignty centres around a company’s independent command over its digital resources, data, and technology infrastructure. More than data ownership, it extends to full control over how data is stored, processed and used. It requires businesses to take responsibility for data protection and regulation compliance and maintain independence in advancing technological environments.

Digital sovereignty comprises three areas:

1. Data sovereignty: Control over data location, processing, and access to ensure compliance with local regulations and protecting sensitive information from unauthorised foreign access.
2. Infrastructure sovereignty: Maintaining authority over physical and virtual infrastructure supporting digital operations, including data centres, networks, and cloud services.
3. Technological sovereignty: Developing and controlling technologies independently, supporting local innovation and reducing reliance on foreign intellectual property and providers.

Why is digital sovereignty important?

The COVID-19 pandemic showed the world the importance of digital resilience. Businesses with greater digital sovereignty demonstrated remarkable agility to adapt to disruptions and ensure business continuity in the unexpected turbulence. In the years since, digital sovereignty has become a strategic imperative, a matter of survival even, for businesses. 

By taking control of digital assets and understanding data privacy regulations, cybersecurity becomes a managed and formidable asset. One where prevention is built into business as usual, since data sovereignty becomes increasingly critical, and where organisations unlock benefits that extend far beyond data and reputation protection. 

Leading by example, BMW and Volkswagen partnered with Amazon Web Services to create a digital production platform that adheres to European data sovereignty regulations, to ensure compliance with GDPR while enabling them to manage its manufacturing processes efficiently across global operations.

In another example, Indian telecommunications company Airtel prioritised regulatory compliance and user trust by investing in local data centres in recent years to keep customer data within the country.

As digital sovereignty becomes more critical, we can expect to see more companies openly discussing their initiatives in this area.

A famous example many might recall where digital sovereignty wasn’t prioritised, Facebook faced global backlash and significant fines due to the misuse of user data by Cambridge Analytica. The lack of controls over data sovereignty and privacy exposed Facebook to reputational damage, legal penalties, and a loss of user trust.

In 2022, ride-hailing service Didi Global was fined 8.026 billion yuan ($1.19 billion) by China’s internet regulator for violating 16 Chinese laws, including those on network security, data security, and personal information protection.

Keeping control locally

By keeping data local, businesses can respond faster to local needs and regulations. When countries ask companies to keep data within their borders, it’s like asking farmers to grow local produce because it helps:

• Creates jobs in the community
• Develops homegrown expertise
• Builds trust with customers who know their information stays close to home

As localisation requirements continue to increase— where data must be stored and processed within the same country or jurisdiction where it was originally collected—having more than doubled in recent years, digitally sovereign organisations find themselves well-positioned to meet these challenges. 

Real-world challenges in achieving digital sovereignty

Cloud services offer scalability and cost savings, but organisations must understand the data localisation laws and requirements across different countries. These requirements which safeguard national interests and citizen privacy, require careful cloud infrastructure and data governance strategies.

For example, India’s Digital Personal Data Protection Act allows cross-border transfers only to countries deemed to have adequate protection standards, while the Reserve Bank of India requires payment data to be stored exclusively within India.

Data regulation and AI governance have seen the European Union as a frequent leader with their comprehensive framework including GDPR, DORA and the AI Act, setting a global standard, it’s also opened up challenges for transatlantic data transfers. The invalidation of the EU-US Privacy Shield agreement in 2020 after being initiated in 2016, also highlighted the ongoing struggle to reconcile different approaches to data protection. 

The EU’s aims are to reduce its dependence on US and Chinese technology giants, particularly in cloud services. Under new leadership, including Commissioner Henna Virkkunen as executive vice president for tech sovereignty, the EU has launched initiatives like the EU Cloud and AI Development Act to address its 80% reliance on foreign digital products and services.

Achieving digital independence requires substantial upfront costs and ongoing investment, but is seen as necessary for long-term strategic autonomy in the digital economy. While large global providers like AWS or Alibaba can offer lower costs due to their massive scale of operations, serving millions of customers worldwide, local providers typically face higher operational costs per customer. This is because their infrastructure, development, and maintenance expenses are distributed across a smaller customer base. For instance, when the EU develops sovereign cloud solutions, the cost per user is inevitably higher than using established global platforms, as they can’t match the economies of scale that come with serving a worldwide market.

Enabling digital sovereignty with cloud providers

Leading providers now offer cloud solutions featuring advanced controls. Launched in July 2022, Microsoft Cloud for Sovereignty helps organisations meet sovereignty needs by deploying workloads with software boundaries, cloud guardrails, and hardware-based confidentiality controls.

Standard offerings now include data localisation and residency to help organisations achieve data sovereignty. Cloud providers must process data within designated national borders using only approved infrastructure and data management techniques, meeting regional regulations, including HIPAA and GDPR, and ensuring operational resilience.

Data processing is now much more transparent. Google’s Access Transparency offers comprehensive logs of employee interactions with company data, and Access Approval lets organisations vet access requests. However, providers retain certain access rights for legal and security purposes.

Taking control of your organisation’s digital future

Creating digital sovereignty is complex but absolutely necessary in today’s data-driven world. As regulatory frameworks tighten globally and AI capabilities advance, organisations must balance the need for technological independence with operational efficiency. 

Sapher understands these challenges firsthand. Our team is supporting organisations internationally to build resilient, compliant, and future-ready digital infrastructures. Connect with us to learn how we can support your organisation’s digital sovereignty goals.