Having dismissed the need for Sovereign Cloud for so long, the hyperscalers have recently introduced sovereign cloud services of their own. Bill Mew looks at the reasons for this as well as the implications.

The Economic Argument – societal value

The cloud giants, or hyperscalers, are often the target of much criticism. Sometime this is focused on their economic impact, the way that they use their commercial power to crush local competitors, while failing to contribute to society by paying their share of taxes or creating local high-skill jobs.

Recently the UK regulator Ofcom published a 254-page report that suggested that the hyperscalers had employed predatory tactics to crush local cloud players and that they tend to use generous allotments of free credits to outbid their smaller rivals, and then once the business is won they “lock in” clients with a combination of hefty egress fees, complex builds and other technical barriers. It has recommended that the Competition and Markets Authority (CMA) launch its own investigation and institute formal remedies to address these issues. Similar investigations in 2022 by the Japan Fair Trade Commission as well as by French and Dutch regulators have reached similar conclusions.

There is also concerns that the tech giants are not only making excessive profits, but that these profits and high-value high-skilled jobs are being taken abroad. While previously tech giants like IBM had large European research labs in Hursley in the UK and Zurich, Switzerland, the current cadre of tech giants have their research and operational centres in the US and operate most things from there. In addition, despite efforts to introduce ‘digital’ taxes, the hyperscalers have evaded all such measures to date – UK government attempts to crack down on multinationals shifting profits overseas and evading tax by introducing a “Google tax” have been ineffective with Amazon’s main UK division paying no corporation tax at all in 2022 or 2023.

The Sovereignty Argument – privacy, compliance and jurisdiction

Fewer people are aware that there has also been a argument playing out in relation to cloud and data sovereignty as well – looking at the fact that as much as the hyperscalers would like to comply with GDPR, their efforts are hampered by a number of intrusive extra-territorial measures in the US, such as the CLOUD Act. For years the hyperscalers have played down the sovereignty arguments, in the hope that clients would ignore such issues, but they have recently changed direction by opting to launch services of their own that are claimed to provide cloud sovereignty. Unfortunately, as the US laws have not yet been repealed or reformed, the hyperscalers are only really able to offer data localisation or data residency and not full data sovereignty.

Indeed the new supposed ‘sovereign cloud’ services from the hyperscalers have simply achieved the following:

• Flattery: This is a massive endorsement for players like VMware that have been championing sovereign cloud all along
• Fakery: Those familiar with the issues are not fooled into believing that the offerings from the hyperscalers are truly sovereign in any way
• Fudging: They are simply causing confusion in the market with data localisation and residency being pitched as full data sovereignty, when it is not

“Imitation is the sincerest form of flattery that mediocrity can pay to greatness.”

― Oscar Wilde

For years the cloud giants have done their best to ignore the elephant n the room, from its trunk ‘cloud sovereignty’ to its ears ‘ data adequacy’ and ‘mass surveillance’.

Now, in launching sovereign cloud services of their own, they are accepting that the trunk exists, but they are somehow still seeking to maintain the the rest of the elephant isn’t there.

For more information about the issues here, see the recent article that I published for VMware here or watch the following video interview with Laurent Allard, Head of Sovereign Cloud EMEA at VMware: