The rise of sovereign cloud is shaking up the cloud computing industry, with new trends and demands reshaping how cloud services are delivered. According to Omdia’s latest market analysis, sovereign cloud has emerged as a critical area of focus for cloud service providers (CSPs), as businesses and governments seek more control over their data and operations. This shift is creating both challenges and opportunities within the global cloud landscape.
Sovereign Cloud’s Growing Influence
Omdia’s 2025 study of the top five Western cloud providers—AWS, Azure, Google, IBM, and Oracle—reveals that these companies dominate the cloud market, with a combined 86% market share across 33 countries. However, despite the global reach of these platforms, the infrastructure still tends to be regionally concentrated. For example, North America boasts 347 data centers, Europe has 194, but China only has three, highlighting the uneven distribution of cloud infrastructure worldwide.
The increasing popularity of edge cloud and sovereign cloud is a major trend reshaping the market. In response to growing concerns over data sovereignty, security, and environmental sustainability, CSPs are being pushed to rethink their cloud strategies. The need for sovereign cloud is particularly strong as countries aim to develop national data policies that restrict data flow across borders.
The Role of Data Sovereignty and Local Regulations
Omdia notes that the European Union is leading the charge with data protection initiatives like GDPR and Gaia-X, which are shaping the sovereign cloud landscape. Other regions, including the Middle East, are following suit with their own regulations, such as Saudi Vision 2030, signaling a growing commitment to local data control. The Middle East alone has seen the establishment of 60 new data centers, underscoring the region’s commitment to building local infrastructure.
One of the driving forces behind the demand for sovereign cloud is the rise of generative AI (genAI). As the technology matures, countries are considering “sovereign AI” solutions, which would be developed and operated within national borders. This trend places additional pressure on global CSPs, particularly those without local facilities, as more business shifts toward regionally-based cloud services.
Sovereign Generated Data: The Next Big Thing in AI
Omdia forecasts that the next few years, particularly 2026 and 2027, will be critical for the development of AI and its integration into sovereign cloud frameworks. One of the key challenges will be managing “sovereign generated data”—AI-generated information that is subject to the same levels of protection as traditional datasets. This raises complex questions about data ownership in the age of AI, as governments and businesses navigate how to protect, store, and control AI-generated content.
Recommendations for Enterprises and CSPs
As sovereign cloud becomes a more prominent feature of the cloud market, Omdia has issued several key recommendations for enterprises, service providers, and technology vendors:
- For Enterprises: Understand which parts of your business and data are subject to local regulations. Develop an IT architecture that ensures compliance with sovereign cloud requirements and supports data sovereignty where necessary.
- For Service Providers: Form partnerships with local organizations to obtain government approval or accreditation for delivering sovereign cloud services. This will help ensure compliance with national laws and facilitate the provision of localized cloud offerings.
- For Technology Vendors: Investigate the specific requirements for meeting local sovereignty regulations and build more modular applications that can be customized to adhere to regional data protection laws.
Omdia’s Six-Level Model for Sovereign Cloud
To better understand the levels of sovereignty in cloud deployments, Omdia has proposed a six-level model, which outlines the degree of control and compliance required at each stage:
- Data Residency: Data must be stored within the country, particularly sensitive data, which cannot be hosted outside national borders.
- Data Processing: Data should be processed by approved local entities, following strict privacy regulations to ensure data handling is compliant.
- Data Privacy: If data is stored and processed locally, it must be protected from unauthorized access, particularly by foreign authorities. This addresses concerns related to international laws like the US CLOUD Act, which allows US authorities to access data stored abroad.
- Generated Data Access and Control: Sovereign cloud frameworks should clearly define who owns and controls AI-generated data.
- Cloud Resiliency: Sovereign cloud must be resilient, meaning that it operates independently of foreign infrastructure, reducing the risk of disruption from geopolitical events.
- Cloud as National Infrastructure: The cloud should be treated like a national utility, subject to government oversight, regulation, and audits.
How CSPs Are Responding to the Shift
In response to the growing demand for sovereign cloud, CSPs have begun adopting two main strategies:
- Full Isolation Model: Major CSPs like AWS and Oracle are creating region-specific, isolated cloud environments that are separate from their global infrastructure. These environments are managed by local personnel to comply with regional regulations such as GDPR.
- Partnership Model: CSPs like IBM and Huawei have embraced a partnership model, where a local service provider or telecom company operates the cloud services on behalf of the global provider. This model ensures data stays within the jurisdiction and allows local staff to manage cloud operations.
Both models reflect a larger trend: CSPs can no longer offer one-size-fits-all solutions due to the complexity of national regulations. Instead, they must offer sovereign cloud options that allow customers to select the level of control, compliance, and privacy they need.
As sovereign cloud continues to grow in importance, Omdia suggests that the optimal approach will depend on the specific needs and regulatory requirements of individual customers. The future of cloud computing lies in offering tailored, region-specific solutions that meet the demands of data sovereignty and security.
