Data residency is about where data is physically stored and processed. Data sovereignty is about which country's laws apply to it.
Why It Matters
- Privacy laws may restrict transferring personal data across borders.
- Sector rules — government, health, finance — may require local storage.
- Customers may demand data stays in their country.
AI-Specific Considerations
- Where are prompts and outputs processed and logged?
- Where are embeddings and vector indexes stored?
- Where does fine-tuning happen and where are tuned models stored?
- Do AI providers use sub-processors in other countries?
Options
- Providers offering regional processing and storage.
- Cloud deployments in specific regions.
- Self-hosted open-weight models in your own environment.
Contracts and Documentation
Record data flows, locations and transfer mechanisms. Include residency commitments in contracts.
Balance
Residency constraints can limit model choice or increase costs. Assess which data truly needs strict residency.