Microsoft Offers EU Customers Option to Store Data in Germany

It would offer European customers the option of storing their cloud data in Germany, addressing concerns about the security of data centers in the U.S. following reports of surveillance by U.S. intelligence agents.Data that customers enter into Internet-based Microsoft software for office and business applications will be stored in two data centers shepherded by Deutsche Telekom AG , Germany’s largest telecommunications group.

Microsoft will be granted access to this data only if it is given permission by the customer or Deutsche Telekom’s T-Systems subsidiary, which will control access to the data. If T-Systems grants access, Microsoft would only proceed under supervision. Microsoft had announced plans to offer cloud services from U.K.-based data centers a day earlier.

The German data centers will “offer customers choice and trust in how their data is handled and where it is stored,” said Microsoft Chief Executive Satya Nadella.

The announcement came weeks after the European Court of Justice struck down an agreement between the U.S. and European Union that had allowed the transfer of Europeans’ personal data to the U.S. The “Safe Harbor” pact violated the privacy rights of Europeans by exposing them to allegedly indiscriminate surveillance by the U.S. government, according to the court. German data protection authorities, after the ruling, said they wouldn’t allow any new data transfers to the U.S.

The ruling by the EU’s highest court has upended technology plans for many trans-Atlantic companies. “It undermines all businesses,” said U.S. Commerce Secretary Penny Pritzker during a recent visit to Germany.
Microsoft believes that with the planned data centers in Germany, U.S. authorities’ access to the data can be prevented, said spokesman Thomas Mickeleit.

“In Europe, there is fundamental skepticism toward cloud services and transfer of data outside the European judicial area,” Mr. Mickeleit said. With the new service, Microsoft responds to customer demand for domestic data storage, he added.

Microsoft said 83% of German businesses expect their cloud provider to operate data centers in Germany, according to a study by German business group Bitkom.

The new service will be available to customers in the EU and some neighboring countries from the second half of next year. Microsoft applications such as Office 365, Azure and Dynamics CRM Online will be delivered from data centers in Frankfurt and Magdeburg.

Since former National Security Agency contractor Edward Snowden accused U.S. authorities of carrying out widespread surveillance, Deutsche Telekom has rolled out a number of products aimed at protecting users from espionage and eavesdropping, including encrypted email, secure smartphones and German data centers.

“We are investing in Germany as a center of IT business because German data protection standards are highly valued,” said Deutsche Telekom Chief Executive Tim Höttges, when opening a data center near Magdeburg last year.

Microsoft’s actions also come after a U.S. judge ordered the company last year to turn over customer’s emails that it stored in Ireland for a narcotics probe. Microsoft has appealed the decision.

Other countries are also pressing U.S. technology titans to keep their citizens’ data on local soil. A new law in Russia requires companies such as Facebook Inc. And Twitter Inc. To store and process data about Russian users within the country’s borders.

Microsoft said Office 365 and Azure would be available from U.K.-based data centers late next year. It would allow data to be replicated within the U.K. for backup and recovery with reduced network distance and lower latency.