Data sovereignty as a business differentiator for software company CPOs

Data sovereignty refers to the concept that digital data is subject to the laws and governance structures of the country in which it is located. This means that data stored in a specific country must comply with that nation's regulations regarding its collection, storage, use, and transfer.

Practically, if your software or technology company has customers outside of your country or industry—or wants to expand —it’s important to meet regulatory requirements to avoid steep fines, legal action, or other negative actions.

Robust data sovereignty capabilities serve as a powerful market expansion tool for software companies, particularly when entering highly-regulated industries such as healthcare, finance, and government. Companies that can meet stringent data residency and sovereignty requirements immediately position themselves to capture market share in these lucrative but compliance-intensive verticals. By investing in data sovereignty capabilities, software companies (sometimes called independent software vendors or ISVs) can transform regulatory compliance from a barrier to entry into a powerful market differentiator that opens doors to previously inaccessible customer segments and geographic regions.

AWS builds regional services without global dependencies (except for centralized identity management and billing) that provide a model for how organizations can design solutions that respect local regulations while maintaining global scale. The AWS European Sovereign Cloud initiative exemplifies this market expansion strategy by creating a separate and independent cloud infrastructure specifically designed to help tackle the evolving regulatory requirements within the European Union, as well as to address their stringent data residency, operational autonomy, and resiliency requirements.

Trust has emerged as a critical business differentiator for many customers. Software companies that implement and clearly communicate transparent data handling practices build deeper customer confidence and establish themselves as responsible stewards of sensitive information. Clear documentation of data flows, storage locations, and access controls allows customers to conduct thorough risk assessments and make informed decisions about their technology partners. One practical example is notifying customers about security and privacy information if they want to link accounts through a third-party API.

AWS demonstrates this approach through its comprehensive technical controls like the AWS Nitro System, which provides strong physical and logical security boundaries. By implementing robust encryption capabilities, including customer-managed keys that cloud providers cannot access, businesses demonstrate their commitment to protecting customer data from unauthorized access. AWS, with a public commitment through initiatives like the AWS Digital Sovereignty Pledge, further reinforces customer trust by establishing clear expectations around sovereignty controls.

The most successful organizations recognize that transparent data handling isn't merely about compliance, it's about creating a foundation of trust that becomes an enduring competitive advantage in an increasingly data-conscious marketplace.

At AWS, we’ve listened to our customers and distilled a number of key themes to make building a data sovereignty strategy relevant to product leaders. Here are three considerations:

• Data residency: AWS customers and their end-users want to know where all their data is, and control where that data is stored and transferred at all times.
• Operator access restriction: AWS customers and their end-users want to be sure that neither AWS nor a foreign government can access their data in the cloud.
• Resiliency: AWS customers want to be sure that they can sustain operations despite geopolitical instability such as foreign influence, natural disasters, or technical failure.

But that’s just the beginning. As you start evaluating long-term needs, AWS experts can help you with a variety of topics that have far-reaching implications for expansion:

• Datacenter placement
  The correct geography in which to host your software is critical to establishing trust with public and regulated industries while addressing sovereignty requirements. AWS global infrastructure, with 36 cloud regions and 114 Availability Zones worldwide, plus the planned European Sovereign Cloud in Brandenburg, Germany, exemplifies how ISVs can execute thoughtful data center placement strategies.
• Local processing capabilities
  Laws across global markets demand placement of sensitive data within defined physical boundaries. AWS Outposts aids delivery of cloud-native solutions while meeting strict data residency requirement by deploying AWS infrastructure directly within customer facilities. Software companies can offer managed solutions on Outposts, ensuring sensitive data remains within defined physical boundaries while maintaining access to the AWS full suite of services and security features. This hybrid approach creates a compelling value proposition for regulated industries, allowing companies like yours to expand market reach without compromising on cloud innovation or compliance requirements.
• Edge computing solutions
  AWS Dedicated Local Zones offer software companies more options to work with regulated industry clients. Dedicated Local Zones is a type of on-premises infrastructure managed and operated by AWS and is built exclusively to provide the same benefits of cloud such as elasticity, scalability, and pay-as-you-go pricing. This infrastructure is customizable, and can be placed wherever you choose so that you can adhere to stringent data isolation, in-country data residency, and compliance requirements.

 

Maintaining confidentiality and the integrity of customer data is absolutely essential. AWS regions are powered by the AWS Nitro System. This system is designed to provide very strong physical and logical security boundaries so that nobody, not even anyone in AWS, can access customer workloads on Amazon Elastic Compute Cloud (Amazon EC2). The security design of the Nitro system, also, importantly, has been validated by independent global cybersecurity firm NCC Group. And this builds upon our continued commitment to be able to provide you the assurance and the transparency you need so that you can understand how AWS services are designed and operated.

AWS customers all over the world turn to us for these types of needs. For example, Datadog is working to find ways to handle data safely in one of their markets. "Highly-regulated industries across both public and private sectors are drilling down on protecting information and privacy without compromise. The ability for Datadog to store and process data regionally within AWS data centers allows us to create sovereign capacity so our customers can meet privacy and security requirements, and comply with government regulations," said Rob Thorne, Vice President, Asia-Pacific and Japan at Datadog.

CPOs are facing the need to balance the benefits of emerging technologies with the need to address security, compliance, and resilience. They manage some of the most sensitive information, and they need to make sure that it stays protected and secure, while still being able to adopt new technologies like generative AI.

AWS offers a wide range of AI services that are built on the same sovereign-by-design foundation. And this makes it easier and more practical for software companies building AI to meet industry needs. One key service is Amazon Bedrock, a fully managed service that offers a choice of high-performing foundation models (FMs) from leading AI companies. Amazon Bedrock allows customers to build and scale generative AI applications quickly, easily, and securely. It supports encryption, enforces access controls, and controls the region for customers. It offers comprehensive monitoring and logging capabilities that support the governance and audit requirements that you must adhere to. No customer data is used to train the original base foundation models. And when your developers fine-tune your model, you make a private version of it and you put it in a secure container that only you can access.

In today's data-driven business landscape, digital sovereignty has emerged as a critical consideration for CPOs seeking competitive differentiation. As highlighted by Max Peterson, AWS Vice President for Sovereign Cloud, "84% of organizations worldwide are either using—or planning to use—Sovereign Cloud solutions in the next year." AWS supports this strategic imperative through multiple pathways: the AWS Digital Sovereignty Competency Partners program, which validates partners with specialized expertise; the Global Security & Compliance Acceleration program offering no-cost advisory services; and AWS Global Passport, designed to accelerate market entry across international regions with varying regulatory requirements.

For CPOs seeking market differentiation, engaging with these AWS programs offers a clear path to addressing emerging sovereignty requirements while expanding into new markets efficiently. For more information on how AWS gives you the freedom to grow in the cloud, visit our website.