Why is data sovereignty important for businesses?

In a world where data is the new oil, data sovereignty is becoming increasingly important for Dutch companies. With growing dependence on U.S. tech giants and increasing concerns about digital independence, organizations are looking for ways to maintain control over their data. Recently, seven Dutch IT companies, including Pegamento’s partner Uniserver, joined forces to offer an alternative to U.S. cloud providers.

This collaboration, known as the Open Cloud Alliance, shows how urgent the issue of data sovereignty has become. For companies, it means making concrete choices about where their data is stored, who has access to it and which laws apply.

What is data sovereignty and why is it important?

Data sovereignty is the principle that digital data is subject to the laws and governance of the country where it is physically stored. This means that Dutch company data stored in the Netherlands is subject to Dutch and European laws, not U.S. or other foreign regulations.

The importance of data sovereignty has grown exponentially in recent years. When you store corporate data with U.S. cloud providers such as AWS, Microsoft Azure or Google Cloud, the U.S. government can demand access to it under certain circumstances, even if it is located in Europe. This is done through legislation such as the CLOUD Act, which requires U.S. companies to transfer data regardless of where it is physically stored.

For Dutch companies, this poses strategic risks. You not only lose control over who has access to your data, but also over how it is used and protected. Moreover, a large part of your IT budget flows to foreign companies, while Dutch knowledge and expertise are built up elsewhere.

Without data sovereignty, what risks do companies face?

Companies without data sovereignty face significant legal, operational and strategic risks. The biggest risk is that foreign governments can demand access to your corporate data without being able to prevent it or even knowing it is happening.

The legal risks are multifaceted. U.S. legislation such as the CLOUD Act can force U.S. companies to transfer data even if it violates European privacy laws. This creates a legal split where you may be violating U.S. and European laws at the same time. For companies in regulated industries such as healthcare, finance or government, this can lead to fines, loss of licenses or reputational damage.

Operationally, you are dependent on decisions made outside your control. If a U.S. cloud provider decides to discontinue certain services or raise prices dramatically, you have few alternatives. Vendor lock-in effects make it difficult and costly to switch to other providers.

Strategically, you lose competitive advantage. Your data is used to train algorithms and AI models, which are then sold back to your competitors. Moreover, you don’t build up your own technological knowledge, making you increasingly dependent on foreign parties.

How do GDPR and AVG affect data sovereignty?

The General Data Protection Regulation (AVG/GDPR) reinforces the importance of data sovereignty by setting strict requirements for cross-border data transfers. Under the AVG, you may send personal data to countries outside the EU only if they provide an adequate level of protection.

The United States has not been subject to an adequacy decision since 2020, after the European Court of Justice declared the Privacy Shield Agreement invalid. Although a new Data Privacy Framework is now in place, legal uncertainties remain. Companies must implement additional safeguards, such as Standard Contractual Clauses, but these do not provide absolute protection against access by U.S. governments.

The AVG also requires companies to be able to demonstrate where personal data is processed and stored. With U.S. cloud providers, this is often unclear because data is dynamically moved between data centers worldwide. This makes compliance complex and risky.

Moreover, under the AVG, you have a duty to inform data subjects about cross-border data transfers. Customers are becoming increasingly aware of their rights and may object to their data being stored outside of Europe. This can lead to loss of customers or legal proceedings.

Which sectors have the highest demands for data sovereignty?

Government, healthcare, financial services and critical infrastructure industries have the highest demands for data sovereignty because of the sensitive nature of their data and specific regulations. These sectors often process state secrets, medical records and financial transactions, or serve vital societal functions.

The public sector is under the greatest pressure. Municipalities, ministries and implementing organizations process citizen data, confidential policy information and sometimes state secrets. A current example is the discussion surrounding the possible sale of Solvinity, which manages the DigiD application, to the American company Kyndryl. This shows how sensitive government data is to foreign influences.

In healthcare, strict requirements apply because of medical privacy and patient safety. Hospitals, mental health institutions and general practitioner practices must be able to guarantee that patient data cannot be accessed by foreign governments or companies. The Electronic Data Exchange in Healthcare Act (Wegiz) has specific data protection requirements.

Financial institutions are supervised by the Dutch Central Bank and must meet strict requirements for operational resilience. Banks, insurers and pension funds must be able to demonstrate that their data is secure and cannot be used for economic espionage.

Utilities, telecom operators and other critical infrastructure providers are designated as vital sectors under the Network and Information Systems Security Act. They must take additional measures to prevent cyber attacks and foreign interference.

How to choose a cloud provider with Dutch data sovereignty?

Choose a cloud provider that is demonstrably Dutch-owned, operates data centers in the Netherlands and is committed to European legislation without U.S. legal obligations. Check certifications, contractual safeguards and technical measures for data localization.

Start by verifying ownership structures. Dutch cloud providers, such as members of the Open Cloud Alliance, have committed to remain under Dutch control. If one of these companies is acquired by a non-European party, the remaining partners take over. This provides structural protection against foreign takeover.

Check where the data centers are physically located and what jurisdiction they fall under. True Dutch data sovereignty requires that your data stays within Dutch borders and is not replicated to servers in other countries. Demand transparency about data location and movements between data centers.

See what certifications the provider has. ISO 27001 certification is essential for information security, complemented by ISO 9001 for quality management and ISO 26000 for corporate social responsibility. These certifications show that the provider is serious about security and compliance.

Pay attention to contractual safeguards. A good Dutch cloud provider offers contracts that explicitly exclude sharing data with foreign governments, except through official requests for legal assistance under Dutch law. There should also be clear agreements about data portability, so you can easily switch if necessary.

What are the costs of implementing data sovereignty?

Implementing data sovereignty involves initial migration costs and potentially higher operational costs, but these are often offset by lower compliance risks, reduced vendor lock-in and retention of data ownership. Total costs vary widely by organization and current IT infrastructure.

Migration costs include transferring existing systems, data and applications to a Dutch cloud provider. This requires planning, temporary duplicate infrastructure and possibly modifications to applications. For medium-sized companies, migration costs can amount to several tens of thousands of euros; for large organizations, it can reach hundreds of thousands of euros.

Operational costs may initially be higher than with large U.S. providers because Dutch cloud providers have fewer economies of scale. However, these costs must be balanced against the risks of fines under the AVG, reputational damage from data breaches and the cost of vendor lock-in with U.S. providers.

Compliance costs often drop significantly. With Dutch data sovereignty, you need to set up less complex legal constructions for cross-border data transfers. You also reduce the risk of AVG fines, which can amount to 4% of annual turnover.

Strategic benefits such as increased customer confidence, competitive advantage through good data management and independence from foreign decisions are difficult to quantify, but can have significant long-term value.

How Pegamento helps with data sovereignty

We help organizations realize their digital independence by offering smart combinations of proven Dutch technologies. Through our partnership with Uniserver, part of the Open Cloud Alliance, we can guarantee that your data remains under Dutch control.

Our approach to data sovereignty includes:

• Complete infrastructure in Dutch data centers with ISO 27001 certification
• Integrated solutions for customer contact, AI and process automation without vendor lock-in
• Transparent data location and processing in compliance with AVG requirements
• Migration guidance of legacy systems to a sovereign Dutch cloud
• Agentic AI assistants trained and deployed locally

Instead of costly custom solutions, we combine standard building blocks to create a unique solution for your organization. You get everything under one roof: from development to implementation, management and support, all from the Netherlands.

Want to know how data sovereignty can help your organization? Contact us for a no-obligation discussion about your digital independence.