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Jan 9, 2024

How Data Localization Impacts Cybersecurity and Cloud Protection


As various governments around the world have begun enacting data protection laws, we have seen an increase in data localization requirements. Data localization is simple enough to understand on a fundamental level. However, its impact on cybersecurity and cloud protection can be profound.

It goes without saying that organizations need to be aware of how data localization regulations impact their operations. Ignorance is never a suitable excuse for violations, and enforcement agencies will not accept it. Equally important is the fact that data localization requirements cannot help but impact how organizations deploy cybersecurity and cloud protection solutions.

Data Localization: The Basics

‘Data localization’ is a general term that refers to any government mandate requiring that organizations process and store digital information within their borders. A government entity might dictate that organizations cannot utilize data processing servers in other countries because that puts customer information at risk.

Note that data localization should not be confused with data residency and sovereignty. While data localization deals with how information is stored and processed, the other two terms deal with slightly different ideas.

Data residency refers to the actual geographic location at which data is stored. As for data sovereignty, it ultimately determines the authority a government can exercise over data generated and stored within its borders.

A typical data localization law forces enterprises to generate, process, and store data within the borders of the jurisdiction in which it operates. Countries have different levels of control and authority based on their sovereign laws.

Localization’s Positive Impacts

Governments enact localization laws to protect data and its owners. But how do such laws impact cybersecurity and cloud protection? From a positive standpoint, consider the following:

  • Reduced Risk – It is often posited that data localization reduces risk by making it more difficult for entities outside a particular jurisdiction to access protected data. In theory, this also reduces the threat of cybersecurity attacks that could otherwise result in large-scale data breaches.
  • Increased Sovereignty – Data localization tends to increase a national government’s ability to exercise control over data generation and storage. Increased sovereignty theoretically gives government more say in cybersecurity and cloud protection.
  • Legal Requests – Data localization streamlines legal requests when local law enforcement wants access to data. Things are also easier for IT teams who do not have to work so hard to fulfill such requests.

Hillstone Networks takes no position on the potentially positive impacts data localization represents. Likewise, we recognize there are some potentially negative impacts as well.

Localization’s Negative Impacts

No data localization regulation is perfect. No set of regulations in a particular jurisdiction can eliminate all cybersecurity threats. Therefore, the potential for negative impacts needs to be considered. We propose the following three negatives:

  • Cloud Fragmentation – Mandating data localization can lead to cloud fragmentation, and, by extension, the security tools and strategies deployed for cloud protection purposes. Security teams could theoretically be hampered by lack of access to restricted data.
  • Higher Costs – Data localization tends to require greater investments in both hardware and software. The result is higher costs to provide the same level of cybersecurity and cloud protection.
  • Poor Data Flow – By its nature, data localization hampers the free flow of data between countries. This creates all sorts of challenges for organizations and their security teams.

Again, Hillstone Networks takes no particular position on the potential negatives of data localization. We do believe that data localization is here to stay. As governments do their best to prevent cybercrime and safeguard sensitive data, they will continue trending toward greater data localization and sovereignty. We need to make the best of it.