What is Data Residency?

Data residency defines the geographic area where an organization’s data is located.  It is important because there are many countries and regions that have laws that require certain types of data, especially personal data, to be stored within their borders.  

Adhering to data residency requirements is crucial for compliance with local data protection, privacy, and security laws, ensuring organizations avoid penalties and maintain customer trust.  

Data residency is important because it enables compliance with local regulations, such as GDPR in Europe. 

At the same time:  

• Non-compliance with regulations may result in financial penalties and legal repercussions.  
• Security improvements are often associated with controlling data storage.  By putting in place various safeguards, such as access control and encryption, SaaS businesses can significantly reduce the risk of unauthorized access to sensitive information.  
• Attention to data residency regulations may be associated with customer trust levels, especially considering the prevalence of international data flows, with possible ramifications for business activity and public perception.

Here are the main differences: 

• Data residency depends on where the data is located 
• Data sovereignty comes from the legal issues surrounding that data.  
• Data sovereignty simply means that the data is under the control of the country where it is located, according to the laws and regulations of that country.  
• Understanding data residency helps determine data sovereignty because a country’s laws extend to data within its borders.  

Businesses must be aware of both concepts to comply with international laws and avoid legal repercussions regarding their data.

Data residency laws create the foundation on where data should be stored and processed.  

• GDPR, General Data Protection Regulation, in Europe 
• CCPA, the California Consumer Privacy Act, in California 
• LGPD, Lei Geral de Proteção de Dados, in Brazil.  

These regulations significantly impact industries like finance and healthcare, requiring them to ensure data storage and processing comply with local laws

GDPR does not specifically require that sensitive information be kept within the EU, but it does influence the location of information assets placed by companies with respect to GDPR, which in essence proscribes certain methods of transferring information across borders.  

Organizations worldwide, that provide services for citizens of the EU, are obliged to comply with the GDPR, which raises the issue of the location of data storage and processing.  

Following GDPR’s data transfer rules relates to data protection levels and customer confidence, regardless of the organization’s base.  

Regulations regarding personal information processing present ongoing developments for SaaS organizations.  

In addition, the need for specialized IT expertise in terms of location privacy is growing.  

The operational complexities of multi-region deployments to satisfy diverse data residency requirements can be overwhelming, increasing both expenses and management overhead. 

The high cost of compliance with regulations is driving away investment in new products and business areas.  This takes away a company’s agility and the ability to grow.

Here is a step-by-step process SaaS organization can follow to achieve data residency compliance:  

1. Identify all the relevant data residency laws in the areas where your users are located and the types of information you handle.  
2. Locate data centers in those areas or use cloud services that provide regional data storage.  
3. Create strong policies for managing the governance of the data, which include 암호화, 접근 제어, 그리고 audit trails, to ensure compliance with the regulations  
4. Regularly review and update your compliance measures, considering insights from sources like Digital Guardian on the benefits of local security standards, and adapt to evolving regulations to maintain data residency adherence.