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Wednesday, February 1, 2023

Due diligence is ever more critical as the battle for cloud sovereignty intensifies


In the last few weeks, the IT industry has seen some very interesting activity from global hyperscale cloud providers surrounding their cloud sovereignty ambitions, and their scrutiny by the regulators covering some basics compliance requirements, like the European Union’s (EU) General Data Protection Regulation (GDPR)

Firstly, AWS made a public pledge called the “AWS Digital Sovereignty Pledge”, consisting of a commitment to provide “the most advanced set of sovereignty controls and features available in the cloud”. After Google’s cooperation with T-Systems and the “Delos” offer from Microsoft, SAP, and Arvato, AWS now follows suit. These initiatives reinforce the growing potential of sovereign cloud services in a world increasingly dominated by questions of cloud choice and control, and complex compliance requirements.

So, what does a pledge mean? The dictionary defines this as a “solemn promise” – which would reasonably beg the question: isn’t this an admission that there is little sovereignty in the offering today? Otherwise, why would it be a pledge? A pledge is forward-looking, something that has not been performed or delivered yet. Also, shouldn’t an announcement like this ideally be backed up with a roadmap? Where is the guarantee that items in this pledge will be fulfilled? Instead, AWS mentions what the pledge will generally cover: control over the location of your data, verifiable control over data access, the ability to encrypt everything everywhere, and the resilience of their cloud. The pledge sounds excellent, but does it meet the minimum standards of most data sovereignty requirements worldwide? It appears, from the general language, that none of it addresses the critical concerns around hyperscale usage, jurisdictional control, legal rights to access the data, and complying with sovereign data requirements that require protection from the U.S. CLOUD Act or Section 702 of the US Foreign Intelligence Surveillance Act (FISA).

Secondly, Microsoft has run aground in Germany with Office 365 reportedly not complying with GDPR. GDPR is 4+ years old and is a huge issue that most companies have joined in the rush not to be penalized by the EU. With Germany’s federal and state data protection authorities (DSK) raising concerns about the compatibility of 365 with data protection laws in Germany and the wider EU, it makes you wonder how other companies may also be falling short in their obligations to protect EU customers’ data. Also, how many other regulatory requirements (such as data sovereignty requirements) that global public cloud providers believe they comply with are prone to be scrutinized by the regulators? This news, of course, is food for thought. Microsoft has denied that this is correct and issued a statement asking for more clarification regarding the view that DSK has. IT executives should therefore take this news as a noteworthy case study to fuel the decisions of their cloud choice, as regulatory requirements concerning data sovereignty are much more complex and niche to comply with than GDRP.

All these issues and many more are putting U.S. and global hyperscale cloud providers in a precarious position when operating a sovereign cloud or other regulated cloud solution, in jurisdictions such the EU, where they must adhere to the EU’s GDPR and U.S. legislation. Indeed, it puts the EU in a precarious position as well, given that 72% of the European cloud market spend was aligned with AWS, Microsoft, and Google in Q2 2022. The EU wants a fair market and a protected European cloud without compromising cloud functionality. However, continued investment by customers in U.S. hyperscale and continual investment in the region of $4b in U.S. hyperscale organizations into expansion means that no European cloud company will ever seriously challenge this market today. The EU certainly has a quandary; on the one hand, enforcing sovereignty would mean no foreign clouds could be used, which would severely damage the EU cloud market; and on the other hand, how to legislate enough to maintain a level of sovereignty that doesn’t exclude foreign providers with some level of external jurisdictional control? It seems that for the foreseeable future, there will be little answer to this quandary, and, in any event, the most prudent approach to compliance appears to be a national, purpose-built sovereign cloud, using external clouds when your data classification meets the needs of unregulated or non-sovereign environments— this seems to be cloud smart!

European cloud providers tend to be more specialized in their services, with nearly all providing managed services, something not found directly in the major U.S. hyperscale cloud provider offerings. I believe this is a good thing. VMware has consistently stated that the future of a well-run cloud-smart IT strategy is multi-cloud and hybrid cloud and that being cloud-smart means we cannot ignore hyperscale offerings. We need them, especially as there are significant innovations and market-leading scalability in these clouds. This is where VMware’s strategy is unique: VMware encourages multi-cloud and helps organizations maintain a cloud strategy that avoids lock-in and maintains quality and security while monitoring performance. The VMware Sovereign Cloud initiative provides national and local cloud provider partners the capability to build purpose-built sovereign clouds, including ones that deliver locally specific requirements in areas such as data sovereignty, including data residency and jurisdictional control, data access and integrity, data security and compliance, data independence and mobility, and data innovation and analytics.

The common misunderstanding when considering using a global hyperscale cloud provider as an option for workloads requiring data sovereignty is that there is compliance because the portfolio, data and applications will be limited to only what can be run in a region. This still doesn’t make it sovereign – it is simply a farce. To be clear, physical location (or data residency), while necessary for data sovereignty, does not constitute data sovereignty entirely for almost if not all data sovereignty requirements around the globe. Data sovereignty requirements are unique to each jurisdiction, but all have many more needs than simple data residency. For example, they all also require jurisdictional control, – which cannot be assumed to be met with a data resident cloud, particularly for U.S. or global cloud providers subject to the CLOUD Act and FISA ruling. It’s therefore essential to recognize that VMware sovereign cloud providers are independent third-party partners across the globe who also manage extensive portfolios of cloud capabilities. Based on VMware solutions and ecosystem vendors, with tools and competitive advantage (under the current regulatory climate) to be able to provide the highest levels of compliance comfort with data sovereignty requirements and/or other regulations such as GDPR.

So, what is the answer here? VMware’s position has not changed; the usage of “trusted” hyperscale clouds denotes a level of trust whereby data that should be placed in a hyperscale cloud is not top secret or restricted, can be protected (using encryption, bring your own key, confidential computing, or privacy-enhancing compute (PEC)) and should be public—i.e., only low-risk data should be placed in any hyperscale cloud, whether trusted or native. Whilst the battles between the hyperscale clouds continue to attempt to achieve sovereign status in Europe. Across the globe, customers should not wait any longer for a magical one size fits all solution or ever trust that their due diligence of regulatory requirements can be delegated to any vendor. Instead, consider a strategy that utilizes the best of all multi-cloud solutions and establishes cloud choices based on data classification, data operations, and risk.

As the diagram shows, there is increased risk associated with non-sovereign cloud solutions, as jurisdictional control is negated in a trusted or hyperscale public cloud. The volume of data applicable to non-sovereign services that should be considered may be lower when you have conducted a thorough data classification exercise. Remember that a sovereign cloud provider delivers services suited to your vertical, whether government, public sector, financial, or many other verticals, and managed services to help you with your cloud adoption strategy. Some also innovate solutions for secure data exchange to enable monetizing your data, a critical component in the growing data market. In addition, VMware Sovereign Cloud Providers may be best suited to support you in managing locally tailored privacy, classifications, and risk analysis, ensuring compliance with the most stringent of standards. As data pertains to personal and non-personal data (think industrial and IoT), a classification exercise will help you understand your risks and how to protect them in alignment with regulatory requirements and mitigate future threats from new data classification standards that are indeed to come.
 
As data markets evolve and data exchange for supply chain and monetization become a critical component of how we do business, it is essential that the right strategy is decided at day 0 and that the limitations of a cloud choice do not compromise the principles of sovereignty you encompass. Additionally, ensure that the cloud provider you select has the right technology capabilities, security infrastructure, and data governance processes to protect your data, meet compliance standards, and provide a secure platform for your business.

Find your closest VMware Sovereign Cloud provider today

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