In July 2024, the Australian government announced a $2 billion (US$1.3 billion) investment in a strategic partnership between the Australian Signals Directorate and AWS in Australia to build a “top-secret cloud” for the government.
The sovereign cloud will help Australia’s national intelligence and defence agencies securely host their most sensitive information. It will also enhance the secure sharing and analysis of classified data at speed and scale, and provide an environment in which agencies can leverage emerging technologies, such as artificial intelligence and machine learning, in their work.
This strategy exemplifies the growth of sovereign cloud in the APAC region, particularly in the public sector. An estimated 48% of agencies in the APAC region plan to include sovereign cloud in their cloud strategy in the next 12 months, according to cloud provider Capgemini.
The future may see the proliferation of sovereign clouds, driven by cybersecurity concerns and data protection regulations that encourage more careful data management across national borders, as large-scale cloud providers invest in sovereign cloud services to meet this growing demand.
Sovereign clouds are growing rapidly in the APAC region
Demand for sovereign cloud solutions is increasing rapidly in the APAC market.
Research from market intelligence firm IDC suggests that 17% of APAC government agencies are already using sovereign cloud services, and a further 30% plan to have adopted this technology by 2025.
In 2022, Capgemini found that 73% of organisations in Australia believed their businesses would adopt cloud sovereignty to ensure compliance with national, state or local government regulations and standards. More recently, Capgemini suggested that its data showed that 64% of organisations in Australia were actively investigating sovereign cloud as part of their strategy.
SEE: The state of edge computing in Australia
In Singapore, the public sector is adopting sovereign cloud technologies:
What are the reasons for the rise of the sovereign cloud?
The rise of sovereign cloud solutions in APAC is driven by several factors, including:
- Geopolitical tensions: Rising geopolitical disruption and uncertainty, including assertive behavior by some countries such as China, raise questions around risk and foreign surveillance.
- Infrastructure control: Governments and businesses want greater autonomy and certainty around the infrastructure they use, and this requires the security of data centers located within national borders.
- Cybersecurity concerns: Threat actors are targeting the APAC region and entities around the world, leading public and private sector organizations to want more control over the security of their data.
- Data protection regulations: The International Association of Privacy Professionals said 137 countries currently have data protection and sovereignty laws, including many in the Asia-Pacific region, creating a complex web of compliance requirements for cross-border data.
- Economic benefits: Investments by hyperscalers and governments in sovereign clouds often provide a boost to the digital economy and industry in their local jurisdiction, as they typically rely on some local vendors and staff.
- Low Latency Processing: Efficient data storage and processing is a key consideration, driving increased demand for localized data management.
Large-scale cloud providers are investing in sovereign clouds
Hyperscalers are investing in forms of sovereign cloud services in the region. These include AWS, Google Cloud and Microsoft Azure, as well as cloud service providers IBM, Oracle Sovereign Cloud, VMware Broadcom Sovereign Cloud and NxtGen Sovereign Cloud.
IDC said these offerings fall into two categories: those designed specifically for the sovereign cloud market and labeled as such; and those that aim to make the deployed infrastructure “sovereign by design” from the start with sovereign controls built in.
For example:
“Many organizations have expressed concerns about the limited choice of sovereign cloud partners and the lack of required cloud features, among other notable challenges,” the IDC report notes. “Perceptions are expected to change in 2024 as vendors in the region have spent the past few years establishing their presence in the sovereignty market.”
Is the future of the cloud sovereign?
The explosion of regulations governing data in the Asia Pacific region means that sovereign cloud solutions will be a major part of the future. The sovereign cloud market in the region is expected to grow rapidly, driven by the increasing need for data sovereignty and compliance.
Hyperscale cloud providers will likely play a dominant role in building these solutions for APAC through an adjustment or addition to their own service propositions for customers, potentially building them together with local government agencies and technology ecosystems.
