Why Service Providers must rethink where and how they store customer data

In a world fuelled by data, where digital trust is currency and geopolitical lines are increasingly blurred, where your data lives and who controls it matters more than ever before.

Yet amid all the noise about faster, cheaper, smarter cloud infrastructure, one critical truth is often ignored: sovereignty isn’t just a technical checkbox. It’s now a strategic imperative.

For years, organisations have handed over their crown jewels, their data, to be stored, backed up, and protected, often without understanding where that data resides, who has jurisdiction over it, or what risks lie in the shadows of compliance, cost creep, and geopolitical interference.

But that is changing. The era of sovereign data is upon us, where control, compliance, and closeness are not optional features but essential foundations for anyone managing or hosting customer information.

For Managed Service Providers (MSPs) and Cloud Service Providers (CSPs), this shift is especially significant. You’re not just handling your own data. You’re hosting and protecting multiple customers’ information, often across industries with unique compliance requirements, data sensitivity levels, and regulatory risks.

And with that comes a new level of complexity. Providers must now contend with multi-tenant data separation and industry-specific governance frameworks. They also need to prove uptime, legal jurisdiction, audit readiness, and prevent unauthorised access across every customer workload.

On top of that, scrutiny around cross-border data transfers, foreign cloud ownership, and sovereign control is intensifying. Your infrastructure decisions are no longer just technical, they’re strategic. Miss the mark and you’re not only risking outages. You’re risking customer trust, compliance breaches, and even legal exposure to foreign courts and regulators.

The stakes are rising. The World Economic Forum’s 2025 Cybersecurity Outlook warns of a sharp increase in threats to data sovereignty, particularly from foreign state and non-state actors. As political tensions escalate, cloud infrastructure is being used as leverage, with access restrictions and data transfers becoming battlegrounds for geopolitical agendas.

However, data sovereignty is not just about jurisdiction. It’s also about availability. In this uncertain climate, both state and non-state actors are ramping up their attacks. Industries like healthcare, finance, and energy are already in the crosshairs. And the risks are not limited to large enterprises. SMBs are frequently targeted due to a perceived lack of security.

In a recent World Economic Forum report, 71% of cyber leaders at the 2024 Annual Meeting on Cybersecurity said small organisations had reached a tipping point. They can no longer adequately defend themselves against the growing complexity of cyber risks. Increasingly, MSPs are on the frontline, trusted to deliver security, performance, and compliance while navigating a volatile legal and regulatory landscape.

Why Jurisdiction Matters

One major challenge is jurisdictional ambiguity.

The U.S. CLOUD Act empowers American authorities to access data held by U.S.-owned companies, even if that data is stored offshore. So even if your customer’s information is hosted locally in Sydney or Auckland, if it’s managed by a hyperscaler like AWS, Google, or Microsoft, it could still be accessed under foreign law.

This creates a serious problem for MSPs. Customers expect you to provide robust security and compliance. Yet you may not have full control over where data is stored, who can access it, or under what conditions it could be handed over.

As a service provider managing multiple customers’ IT, cybersecurity, and data strategies, you must set out a clear plan for these assets. That’s why service providers need a sovereign data strategy now more than ever.

Adopting the Three C’s of Sovereign Data Strategy

At Exaba, we believe there are three foundational pillars every service provider must adopt to ensure resilience, compliance, and trust.

Control

Control means knowing exactly where every customer’s data resides, who has access, and how it’s handled. Without this, you’re exposed to security threats, third-party access, vendor lock-in, and geopolitical interference. Providers without full visibility risk compromising both customer confidence and their own business model.

Compliance

Compliance is growing more complex and unforgiving. Whether it’s the NZ Privacy Act, Australia’s Consumer Data Right, GDPR, the U.S. CLOUD Act, or emerging global standards, service providers are expected to meet requirements seamlessly. Sovereign infrastructure simplifies compliance by keeping data within local jurisdictions and eliminating the legal grey zones global clouds often create.

Closeness

Proximity matters. Not just for performance, but for reliability, recovery, and user experience. Data stored locally reduces latency, improves backup speeds, and keeps workloads close to the people who rely on them. In a world of real-time expectations, closeness is not a luxury. It’s a necessity.

Together, Control, Compliance, and Closeness are not bolt-on features. They are foundational principles that define how resilient, responsive, and trustworthy your business will be in the years ahead.

Data residency vs data sovereignty, why the distinction matters.

Let’s set the record straight.

Data residency refers to the physical location where your data is stored. Data sovereignty, however, goes further. It refers to the legal and operational control of that data under the laws of the country where it resides.

Think of residency as a post box address. Sovereignty is who holds the key — and who can unlock it, with or without your permission.

With legislation like the U.S. CLOUD Act, even if your data is stored locally, it can still be accessed by a foreign power if hosted by a foreign-owned provider. That’s not residency. That’s exposure.

As a service provider, offering both sovereign and non-sovereign data strategies will be crucial.

The sovereignty surge. Data is booming and so are the stakes.

The volume of global data is set to hit 181 zettabytes in 2025 (Statista, 2024). Object storage — the backbone of modern backup and archival workflows — is projected to grow at 13.6% CAGR, reaching USD $26.8 billion by 2027 (IDC).

What’s driving this growth? Backup. Backup data now accounts for over 60% of the average enterprise’s total data footprint.

For service providers, this creates both challenges and opportunities. You’re managing massive volumes of unstructured backup data while balancing performance, regulation, and cost constraints.

Yet more than 80% of organisations still store backups in global hyperscaler environments, where jurisdictional clarity is fuzzy and billing practices are far from transparent.

But things are shifting. Public cloud use for highly sensitive data is declining. Employee and customer information is increasingly moving back to local, sovereign storage, driven by regulation, cost volatility, and geopolitical uncertainty.

For MSPs and CSPs, the signal is clear: embrace sovereign-first backup strategies and you gain a real competitive advantage.

Why?

• Differentiate services in regulated industries.
• Avoid hidden egress costs and protect margins.
• Maintain full control over data location.
• Build trust with customers concerned about governance and compliance.

In today’s climate, sovereignty isn’t just risk mitigation. It’s a smart business move.

Why Sovereignty now? Five reasons Service Providers must rethink their data strategy.

Adopting a sovereign data approach isn’t about checking a compliance box. It’s about protecting margins, future-proofing, and building trust at scale.

Trust in the Relationship
Customers want accountability, not just technology

Proximity = Performance
Sovereign infrastructure ensures data stays close to end users and applications. This reduces latency and improves recovery times. In a multi-tenant world where customers demand real-time access, proximity is a competitive differentiator.

Compliance Without Contortion
Global cloud models create legal minefields when juggling multiple jurisdictions. Sovereign storage keeps data under local laws, simplifies audits, and reduces overhead.

Geopolitical Resilience
Foreign access, sanctions, and service restrictions are now real threats. Sovereign data provides insulation from external interference and ensures continuity in turbulent times.

Economic Control & Fair Value
Hyperscalers erode provider margins with hidden fees and lock-in. Sovereign partners like Exaba offer transparent pricing, designed to help you grow profitably.

What Exaba stands for

At Exaba, we didn’t build for scale above all else. We built for service providers and their customers.

We believe data should be:

• Closer to those who use it.
• Simpler to manage and bill.
• Sovereign by default, not by exception.

Our mission is to create a trusted, globally distributed storage platform that gives power back to those who serve others. Not hidden behind foreign clouds or complex pricing models. But local-first, partner-powered, and ready to scale.

In a world where MSPs and CSPs must guarantee security, performance, and compliance, sovereignty becomes the baseline — not the bonus.

Without a sovereign strategy, you risk:

• Legal grey zones from foreign control.
• Unpredictable costs and access restrictions.
• Loss of customer trust and confidence.
• Regulatory penalties from non-compliance.

We believe in infrastructure that supports national compliance, protects sovereignty, and delivers clear value to partners. Whether you’re backing up terabytes or scaling to exabytes, Exaba helps you do it securely, transparently, and locally.

In this moment of uncertainty, with rising data volumes and mounting geopolitical tension, a sovereign-first approach isn’t just wise. It’s essential.

It’s the foundation your business should be built on.

Find out how Exaba can help you design your sovereign-first data strategy.

#MSP #CSP #DataSovereignty #ObjectStorage