Last week, PinnacleOne reviewed the collision of commercial interests and state competition in space.

This week, we step back and examine the growing trend towards digital sovereignty, manifesting in national competition to secure and lead increasingly strategic cloud, AI, and space networks.

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Insight Focus | Digital Sovereignty and Splinternets in Cloud, AI, and Space

The concept of digital sovereignty has gained significant traction in recent years as nations seek to assert greater control over critical economic and military capabilities at the technical frontier. This trend – driven by geopolitical competition and the strategic importance of data, cloud computing, artificial intelligence (AI), and space technologies – has significant implications for global businesses. As nations pursue sovereign capabilities across these domains, corporate leaders must navigate an increasingly complex and fragmented digital and security landscape.

Data/Cloud Sovereignty

Nations are establishing sovereign cloud services to maintain control over their data and ensure compliance with local regulations and privacy requirements. The partnership between Microsoft and G42 in the United Arab Emirates exemplifies this trend, offering secure access to cloud and AI features while adhering to local data sovereignty requirements. Microsoft is also expanding its Azure services footprint in the UAE via Khazna Data Centers, a joint venture between G42 and e& to support this initiative.

In the words of Secretary Raimondo, “When it comes to emerging technology, you cannot be both in China’s camp and our camp.” It remains to be seen which side will end up benefiting more from this deal, given how much the U.S. had to offer to (apparently) woo G42 from its Chinese entanglements. Nevertheless, the forces of geopolitical network competition are clearly multipolar – this gives middle powers juice to make deals with multinational cloud providers on favorable terms, including respect for data sovereignty and localization of frontier capabilities.

AI Sovereignty

The strategic importance of AI is leading more nations to pursue AI sovereignty, recognizing the need to develop and (attempt to) control this transformative technology. Industry leaders like Jensen Huang of Nvidia and Arvind Krishna of IBM have advocated for countries to build their own “sovereign AI” capabilities, tailored to their specific language, cultural, and business needs.

Leading and guiding AI technologies is seen as critical for defending national interests and ensuring economic and military security. Examples of sovereign AI strategies include India’s plan to organize and make available Indian data for AI model creation, Singapore’s Southeast Asia AI plan, the Netherlands’ generative AI vision, and Taiwan’s sovereign model strategy to counter the influence of Chinese AI tools. As a sign of the times, some tech investors are eyeing the idea of “sovereign computational stacks” which float aboard undersea-cable connected platforms that help sanctioned entities skirt regulators.

Space Sovereignty

Nations are also seeking to establish their own satellite constellations for secure, reliable, and high-bandwidth communications, commercial space-based observation, scientific, and defense purposes. The United States’ Proliferated Warfighter Space Architecture (PWSA), a secure low-Earth orbit (LEO) network, and China’s plans for a LEO broadband constellation highlight the growing importance of space sovereignty in the LEO domain, currently dominated by SpaceX. The European Union has also approved plans for the IRIS 2 constellation, a multi-orbit satellite system designed to bolster Europe’s governmental and institutional communication services and digital sovereignty.

The Emirates has formed their own national space champion, Space42, by merging their AI-driven geospatial intelligence provider Bayanat with Yahsat, the UAE’s principal satellite firm. The link between space and AI is explicit per the Space42 chairman, “Building upon its enormous capabilities, the new entity is poised to play a significant role in realizing the ambitious objectives outlined by the National Space Strategy 2030 and the National Strategy for Artificial Intelligence 2031”.

As we examined last week, these developments have significant implications for the blurred lines between commercial interests and national imperatives as the space domain becomes increasingly contested and potentially a field of conflict.

Compliance and Cybersecurity Challenges

As nations assert digital sovereignty, companies operating globally will face a complex web of data governance, privacy, and operational regulations across multiple jurisdictions. Compliance with diverse requirements for data localization, storage, processing, and access will be a significant challenge. Moreover, the fragmentation of digital infrastructure and the proliferation of sovereign systems may introduce new cybersecurity risks, as companies must ensure the security and integrity of their data and systems across multiple platforms and jurisdictions.

Market Access and Data Flow Implications

The rise of sovereign cloud services, AI capabilities, and space and terrestrial communication networks may restrict the free flow of data across borders and limit market access for foreign companies. Nations may prioritize domestic providers or impose barriers to entry for foreign firms, particularly in strategic sectors. For example, China’s LEO broadband constellation could hinder outside attempts to garner market share within the country or its allies. Executives must anticipate potential disruptions to their global operations and supply chains while exploring partnerships or localization strategies to maintain access to key markets.

Navigating the Fragmented Digital Landscape

The proliferation of sovereign digital infrastructures could lead to a fragmented global digital landscape, often referred to as the “splinternet”. This fragmentation may hinder interoperability, collaboration, and innovation across borders, impacting the ability of multinational companies to leverage digital technologies effectively. Leaders must consider the long-term implications of a splintered digital ecosystem and develop strategies to navigate this increasingly complex environment while ensuring the security and resilience of their digital assets.

Strategic Considerations for Corporate Leaders

1. Assess compliance and cybersecurity requirements – Evaluate the impact of digital sovereignty regulations in each market and ensure compliance with data governance, privacy, and operational requirements while addressing the cybersecurity challenges posed by fragmented digital infrastructures.
2. Mitigate market access risks – Anticipate potential disruptions to global operations and supply chains due to restricted data flows and market access barriers. Consider partnerships or localization strategies to maintain a presence in key markets.
3. Adapt to a fragmented digital landscape – Develop strategies to navigate the complexities of a splintered digital ecosystem, addressing interoperability challenges, potential barriers to collaboration and innovation, and the cybersecurity implications of operating across multiple sovereign platforms.
4. Invest in resilient and secure digital infrastructure – Build resilient and adaptable digital infrastructure that can withstand the challenges posed by digital sovereignty trends and ensure the security and integrity of data and systems across multiple jurisdictions.
5. Engage in policy dialogues – Actively participate in policy discussions and industry forums to advocate for balanced approaches that safeguard national interests, promote global collaboration and innovation, and address the cybersecurity challenges posed by digital sovereignty.

Going Forward

The pursuit of digital sovereignty by nations has significant implications for the global digital landscape, potentially leading to a fragmented “splinternet” and introducing new cybersecurity and enterprise architecture challenges. Corporate leaders must navigate an increasingly complex web of compliance requirements, market access barriers, interoperability issues, and cybersecurity risks.

By proactively assessing the impact of digital sovereignty trends, adapting strategies accordingly, investing in secure and resilient digital infrastructure, and engaging in policy dialogues, executives can position their organizations to thrive in an increasingly complex and fragmented digital world.