Global spending on sovereign cloud solutions is expected to exceed $250 billion by 2027, according to IDC.
A new report from market intelligence firm IDC has predicted an increase in the adoption of sovereign clouds by Asia-Pacific (APAC) governments due to geopolitical tensions and evolving data privacy regulations. The report revealed that one-third of APAC governments plan to adopt sovereign cloud by 2026, driven by concerns related to cyber threats, evolving data residency regulations, and information security.
“The governments also see sovereign cloud as an economic advantage, encouraging investments from hyperscalers in local data centers to enhance digital economy and industrial prospects,” the report stated.
IDC defines a sovereign cloud as a subset of digital sovereignty that is “an architecture enabled to comply with a country’s data residency requirements, sovereignty regulations, and audits.”
Growing Interest in Sovereign Cloud
The report highlighted that 17% of APAC governments are already using sovereign clouds, with a third intending to adopt them in the next two years, indicating the growing interest in this technology in the region. Additionally, 33% of APAC governments are evaluating the feasibility of these solutions, though they have not yet finalized their decisions, according to IDC.
According to another research from Capgemini, in Australia alone, 64% of organizations are actively exploring a sovereign cloud strategy, compared to 52% globally. Despite a notable increase in interest in sovereign cloud adoption by highly regulated sectors such as the public sector, this trend is not limited to them, according to Ravikant Sharma, director of government insights research at IDC Asia/Pacific.
“This trend extends to related industries affected by sovereignty-focused policies, such as utilities and healthcare,” Sharma noted. “These sectors are proactively preparing for potential changes in government regulations and policies, especially regarding data residency requirements.”
Cloud Giants Compete for Sovereign Cloud Market
Global spending on sovereign cloud solutions is expected to surpass $250 billion by 2027, according to IDC. The report highlighted that major cloud providers like AWS, Google Cloud, and Microsoft Azure are actively expanding their offerings to meet the growing demand for sovereign cloud in APAC.
“These three hyperscalers (AWS, Google Cloud, and Microsoft Azure) continuously tailor their sovereign cloud solutions, adding more features to enhance their appeal to governmental entities,” IDC stated in the report. These providers are customizing their services to meet the specific requirements of governments in these regions, such as offering dedicated data centers and implementing robust security measures.
Navigating the Sovereign Cloud Landscape
However, the path to adoption is not without obstacles, the report points out. “APAC governments also face significant challenges, such as high implementation costs, complexity, security concerns, and potential restrictions on innovation.”
“Successful adoption requires prioritizing investments, classifying data, and aligning trust with organizational goals. Providers must thoroughly educate and offer practical solutions for effective sovereign cloud implementation,” Sharma from IDC said.
Organizations in the APAC region are considering adopting sovereign cloud due to the “perceived benefits it offers.” The primary factor, Sharma explained, is data security and privacy. “This concern is closely tied to the desire to be prepared for the future of data-driven business innovation, which is the second most significant expected benefit.”
Impact on Innovation and Economic Growth
The adoption of cloud by government organizations in APAC “will vary by country,” IDC noted in the report. “However, overall, the sector lags behind compared to other industries, with three-quarters still identifying their maturity as ad hoc or opportunistic, compared to half of other industries.”
Another significant concern, according to Sharma, is the “potential impact on the speed of innovation.” “A notable percentage (36%) of digital innovation teams and business lines fear sovereign cloud could hinder innovation by slowing down processes.” This fear, he explained, is linked to the importance of data flows across industries and borders, which are considered “critical to accelerating innovation.”
As APAC governments navigate the complexities of geopolitical tensions, data sovereignty, and economic growth, the adoption of sovereign cloud emerges as a significant trend that will shape the region’s digital economy. “To successfully navigate this evolving landscape, it is crucial to establish strong partnerships with trusted and competitive entities. This strategy helps businesses weather changes and remain relevant in the long run,” Sharma concluded.