Microsoft is set to introduce in-country data processing for its AI tool, Microsoft 365 Copilot, in 15 countries by 2026—a major move aimed at strengthening data sovereignty and regulatory compliance.
According to a company blog post, customers in India, Australia, Japan, and the United Kingdom will be the first to gain the option for local processing of their Copilot interactions by the end of 2025. By 2026, this option will expand to 11 more nations, including Canada, Germany, the United States, and the UAE.
Data Governance and Security
This initiative is part of Microsoft’s strategy to enhance governance, security, and performance for government and highly regulated industries by ensuring user data is processed and stored locally. With this change, Copilot interactions—including prompts and responses hosted on Azure OpenAI models—will be handled within local data centres.
The company noted this builds on its existing data residency efforts, which currently cover 27 nations for Microsoft 365 and Copilot, as well as the EU Data Boundary.
Compliance Overhaul Following Nayara Dispute
The expanded sovereign controls follow a recent overhaul of Microsoft’s compliance framework, which was initiated after a legal dispute with Nayara Energy earlier this year.
In July, Microsoft Corp. temporarily stopped providing services to the India-based refiner following EU sanctions over its Russian links. Nayara Energy decided to take legal action against a major tech company after a problem arose, but the company fixed the issues before the lawsuit could be addressed in court. To make sure this doesn’t happen again, Microsoft announced new and improved guidelines and safety measures specifically for their services in India last month.
As part of this overhaul, Microsoft also established a Public Sector and Critical Infrastructure Customer Council, led by Microsoft India and South Asia President Puneet Chandok, to engage with critical sectors.
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