Welcome to this week’s edition of the Fierce Network Research Bulletin, where we’re talking about sovereign clouds as an emerging trend for nations seeking to build and maintain economic leadership. Also read on for the Control Plane, Stat of the Week and the Dropped Packet.
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As nations recognize the strategic value of cloud and AI, they're passing laws and regulations to keep those resources inside their borders
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“Pretty much every government is going to want a sovereign cloud and dedicate region for that government,” Larry Ellison, Oracle chairman and CTO, said on a March earnings call
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IBM CEO Arvind Krishna is a "firm believer" in sovereign clouds
For thousands of years, resources such as agricultural land, navigable coastlines and access to oil coal, and gas have been the foundations on which cultures are built that dominate the world.
Today, information is just such a strategic resource, an advantage which will only become more important with the emergence of artificial intelligence (AI). That information is moving quickly to the cloud. To keep up, nations are passing data sovereignty laws, requiring information, applications and underlying infrastructure to be kept within national borders.
“When we entered the industrial age, if you didn’t have access to oil, it was very hard to compete, build your industrial base and elevate your society in terms of wealth and welfare,” said Kevin Cochrane, chief marketing officer for Vultr, a cloud platform operating in 32 regions worldwide and specializing in providing access to Nvidia processors for AI workloads. “If you think about cloud infrastructure in the generative AI era, the equivalent of oil is your GPUs and your core cloud infrastructure services. They enable the development of new applications, and entirely new industries and new businesses.”
Cochrane added, “Sovereign clouds are critical for every nation to be able to advance their economies and elevate their national objectives.”
Brian Roddy, VP security product management, Google Cloud, agreed.
“Every country recognizes that AI is going to be transformative to the businesses that operate in those countries, as well as the way governments deliver services to their citizens,” he said. “They’re all going to want to make sure that they have access to the latest and greatest technology, without sacrificing security, privacy and autonomy. As a result of this, every country is paying close attention to make sure they have the right rules and regulations in place to be successful.”
IBM breaks down sovereign cloud into several components, said Utpal Mangla, IBM VP for industry edge, sovereign cloud. Data sovereignty governs the physical, geographical location of the data. Operational sovereignty governs where the people operating the cloud and applications are located, and where they are residents of. And digital sovereignty encompasses compliance of applications to relevant local regulations.
Moreover, IBM sees a fourth category emerging: AI sovereignty, which governs factors including where models are built and run, their openness, whether they include local data, and so on . “Governments are getting more involved because having sovereign AI is seen as driving the engine toward the next level of economic growth,” Mangla said.
“Sovereignty will become more pronounced with the advent of technologies such as generative AI,” Gartner analyst Sid Nag said.
The legal landscape
Laws and regulations governing cloud sovereignty are manifold. Europe has the General Data Protection Regulation (GDPR), governing the transfer of personal data, as well as the European Cybersecurity Certification Scheme for Cloud Services (EUCS), for certifying cloud security (as the title says). Europe also has country-specific laws, such as the German Privacy Act, restricting data transfers to other countries. And Germany is developing its sovereign cloud in collaboration with T-Systems and Google Cloud. As with most sovereign cloud regulations, German law governs companies doing business in Germany, whether those companies are located in Germany or not.
Likewise, the U.K. Data Protection Act aligns with the GDPR but is tailored for U.K.. And Singapore, Russia, Malaysia and China all have their own data sovereignty regulations.
The U.S. has the federal Clarifying Lawful Overseas Use of Data (CLOUD) Act, and many industry-specific federal laws, such as the Health Insurance Portability and Accountability Act (HIPAA) and state-specific laws such as the California Consumer Privacy Act (CCPA).
In Southeast Asia, Singapore, Malaysia, Thailand and Indonesia, among others, are partnering with enterprises to develop cloud sovereignty.
Deloitte estimates government cloud spending will exceed $41 billion in 2024, up 16% year-over-year and IDC projects global spending on sovereign cloud solutions will exceed $250 billion by 2027.
Where will it end?
“Pretty much every government is going to want a sovereign cloud and dedicate region for that government,” Larry Ellison, Oracle chairman and CTO, said on a March earnings call.
Karan Batta, SVP, Oracle Cloud Infrastructure, elaborated in a statement to Fierce Network. “As with any technology, as sovereign cloud offerings mature the barrier to entry will become lower, enabling more countries to adopt the technology.”
IBM’s Mangla said, “I will go one step further by saying every country will have a sovereign AI solution. One of the underpinnings of sovereign AI is sovereign cloud.”
Governments need to support setting up national AI computing centers and common data sets for specific use cases, IBM CEO and chairman Arvind Krishna said at a media roundtable in India in August.
“I am a firm believer that every country ought to have some sovereign capability on artificial intelligence, including large language models for AI,” Krishna said. These could be used for “domestic use cases that the world does not want to invest in” or to avoid exposing cloud resources to the outside world.
The cloud competitive advantage
Sovereign cloud doesn’t just benefit nations. It also benefits individual businesses.
With sovereign cloud, a company gets its own infrastructure, Vultr’s Cochrane said. “All our data centers around the globe are airgapped and completely partitioned and separate,” he said. Sovereign cloud safeguards data, intellectual property, enables a business to control its future, enhances security and guarantees performance.
Oracle’s Batta said, “The primary business advantage enterprises and CSPs gain by using sovereign cloud is reducing the risk associated with sharing information beyond country borders and jurisdictions, as well as demonstrating compliance with privacy laws.”
He added, “In addition, sovereign clouds’ disaster recovery capabilities can provide resilience during a crisis such as a natural disaster, helping organizations increase the likelihood that compliant services remain available to their customers.”
Let innovation bloom
Sovereign cloud helps enable innovation to come from anywhere in the world, Cochrane said.
“What national governments and organizations are realizing in this era of generative AI is that we need to not allow the hyper-consolidation of data and infrastructure solely based on one geographic location,” he said. “It’s become a national imperative for companies and nations around the globe to think about how they provision their own infrastructure to enable their economies to compete in this new AI era.”
Cloud sovereignty is driven in part by the fact that cloud is largely located on hyperscalers, which are largely North American-based and mistrusted by people outside that continent, Gartner’s Nag said. “They don’t want to be at the mercy of hyperscalers not based in Europe,” he said, adding that it’s odd that there hasn’t been a single hyperscaler in Europe that has risen to the scale of a North American major cloud platform. “If there was a desire for sovereignty, why can’t they band together and compete.”
Let’s leave it there. Join us next week when we’ll briefly go over the sovereign cloud strategies for a half-dozen major and emerging cloud platforms.
The control plane
What I'm reading this week
- Who's who in 5G private networking? [Dan Jones / Fierce Network]
- AWS CEO Adam Selipsky leaves [Diana Goovaerts / Fierce Network]
- Comcast CEO talks competition, asserts company as ‘tech-driven’ [Masha Abarinova / Fierce Network]
- Google I/O 2024: everything announced [The Verge]
- Hyperscalers fuel France’s AI ambitions [TelecomTV]
- Oracle goes vegan: Dumps Terraform for OpenTofu [The Stack]
- How Airlines Are Using AI to Make Flying Easier [The New York Times]
- A.I.’s ‘Her’ Era Has Arrived [The New York Times]
- Did IBM make a $6.4 billion blunder by buying HashiCorp? [The Register]
- I Went To China And Drove A Dozen Electric Cars. Western Automakers Are Cooked [Inside EVs]
Stat of the week
Gartner: 67% of mature organizations are creating new roles for GenAI and 87% of these organizations have a dedicated AI team.
What I’m watching for next week
- IBM’s big Think 2024 conference (May 20-24)
- Nvidia earnings (May 22)
Dropped packet
That's it for this week, folks. Stop back on Fridays for the latest issue of our Fierce Network Research Bulletin.
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