As far as cloud service providers go, they will shift data around several locations depending on the cost factors and redundancy needed by the client. But in moving data across data centers all over the globe, these service providers also have to deal with privacy regulations and data residency laws. This becomes a critical area of reckoning when cloud service providers are processing data in locations which are known to have slightly less rigid laws as far as data protection goes. Cloud computing needs a flexible infrastructure but installing a data center in every data residency jurisdiction is not a practical solution.
When the movement of data is ruled by a large number of constraints then it can become a cost prohibitive option for clients. There is also the consideration of different regulations when it comes to national security.
For instance, the USA has FISA and the USA Patriot Act which have the power to subpoena cloud service providers for information stored in their infrastructure.
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