What is Data Localization?

Since the arrival of the internet, the world, as we know it today, has become a global village. With this advancement in the internet comes a greater and uninterrupted flow of data that must be monitored and examined by the stakeholders involved. Due to this free flow of data, many countries are trying to limit data regulation, such as Russia and China, who are already trying to enact data localization laws that would inhibit the free flow of data across the world.

Other countries are also following suit, with data protection and data localization laws being adopted by governments to restrict and control the flow of information to and from their jurisdictions and regions. But before we relate the benefits of data localization, let us shed some light on what it really is.

What is Data Localization?

Data localization refers to a mandatory legal or administrative requirement directly or indirectly stipulating that data be stored or processed, exclusively or non-exclusively, within a specified jurisdiction. In other words, data localization laws restrict the cross-border transfer of data. So if your business collects data from customers in another country, depending on the laws in place, you may need to keep that data there rather than transferring it back home – or anywhere else – for processing.

It’s also important to distinguish between data localization and data transfer. Data localization laws pertain to the location where personal data is stored. By contrast, data transfer laws regulate the ability to disclose copies of personal data outside the borders of a country or region without requiring local storage.

Why is Data Localization needed?

It is required by organizations and companies for various reasons, some of which are:

• The national laws of some companies require a mandate that requires certain data to be physically stored on servers within the country
• There is also a need to comply with data protection and privacy which leads to a need for data localization practices
• Data storage within a country is more cost-effective, especially in cases where a cross-border transfer of data is being practiced
• Some enterprises and data storage technology companies, as well as the public, favor data storage measures and strategies
• Data localization often requires a better IT system and infrastructure as well as strict security measures, especially for data related to business operations.

How does it work?

Data localization is fairly simple for organizations that are based in a single country or region and use on-premise infrastructure to store data. As long as their data remains secure within their data centers, it should be properly localized.

Cloud computing makes data localization more complicated. Cloud servers are accessed over the Internet and can therefore be located anywhere in the world. Organizations that rely on cloud computing have much less visibility into where their data is actually processed and stored since the cloud computing vendor handles those decisions.

However, it is possible with cloud computing if the cloud vendor commits to only processing and storing data within data centers in the specified region. Not all cloud vendors have enough of a global presence to set this up, but many do.

If a cloud vendor has a data center within the required region, then there are any number of ways they can ensure a given customer’s data remains in that data center.

Benefits of Data Localization

• Obtaining greater transparency into your data flows: As governing bodies continue tightening their requirements across the world, transparency is an emerging theme between them. Building transparency in your data flows today is highly likely to pay dividends to your privacy program in just a few years.
• Enabling sound decisions related to data processing architecture: You should be advising your organization on data localization requirements as they pertain to cloud computing operations. For example, it might not be wise to renew a ten-year contract if your cloud vendor can’t fulfill your data privacy roadmap a few years from today. Or, if your organization operates on-premises servers, your data localization initiatives will significantly influence how the business develops and allocates servers moving forward.
• Future-proofing for forthcoming regulations: All signs point to data localization increasing in importance. Providing a robust investment into your data localization efforts now, including your organization’s data map, will inevitably support your future needs for forthcoming privacy regulations.

Data Localization vs Data Residency

Data localization and data residency are two terms that are sometimes used interchangeably, although they have slightly different meanings. On its own, “data residency” refers to the place where data is stored. Data residency requirements may compel organizations to change where their data resides. Data localization is the action of complying with data residency requirements.

Conclusion

Data privacy and regulation are the need of changing times, as the free flow of data requires stringent and strict checks and surveillance. This is why countries worldwide are increasingly adopting data localization measures to restrict and regulate the flow of data across borders. Countries are increasingly using data localization to restrict this flow of data across borders and regions, and it is likely that with changing times, the adoption of data localization practices will increase among countries and corporations.