How can CIOs confront data residency complexities amid rising compliance pressure

Last week, OpenAI, the creator of ChatGPT, announced support for data residency in India across select offerings, including ChatGPT Enterprise, ChatGPT Edu, and its API platform. The move is aimed at aligning with the region’s growing data sovereignty requirements.

OpenAI joins a growing list of global technology firms such as AceCloud, Anaplan, and Atlassian, which are offering Indian customers data residency by establishing local data centers or zones within the country.

According to Gartner, as digital reliance deepens, governments are introducing new regulations to protect citizens, consumers, and businesses within their jurisdictions. This has led to the rise of data residency frameworks, which require that data be stored within national borders to meet compliance, privacy, and security mandates. 

Data residency in India

India has adopted a layered approach to data residency and localization, combining overarching regulations like the Digital Personal Data Protection Act (DPDPA) with sector-specific mandates issued by regulators such as the RBI and IRDAI.

“Data that must be stored exclusively in India typically includes customer personally identifiable information (PII), financial transaction records, KYC/AML data for regulated sectors, content related to government projects, and any public sector or national security-sensitive information,” explained AS Rajgopal, CEO & MD at NxtGen Cloud Technologies.

Notably, last month, the Bengaluru-headquartered cloud and data center provider launched its own sovereign cloud for the BFSI sector called the Financial Services Cloud (FSC).

However, data residency doesn’t always translate to exclusive onshore storage. Certain data types often get routed abroad unintentionally, such as backups, disaster recovery files, logs, diagnostics, AI training data, metadata, and collaboration content. “Data residency doesn't always imply exclusive storage in India (i.e., hard data localisation) unless explicitly stated. In some cases, it may coexist with mirrored or backup copies overseas,” said Supratim Chakraborty, Partner at law firm Khaitan & Co.

There are several reasons behind this, including high costs, lack of flexibility, and the complexity introduced by both technical and regulatory factors.

“The cost and effort in setting up cloud architecture in India are a big challenge. In certain situations, ensuring complete residency could mean not only residency for the principal dataset, but also for backups, disaster recovery sites, logs, metadata - components that could more conveniently be spread across multiple jurisdictions,” noted Probir Roy Chowdhury, Partner at JSA Advocates & Solicitors.

As India sharpens its focus on data sovereignty, organizations are required to move beyond surface-level compliance to ensure true end-to-end data residency. This calls for proactive audits, stronger vendor commitments, and infrastructure choices aligned with both regulatory and operational realities.

How can CIOs verify data residency

Verifying data residency is not always straightforward, given the complex architecture of modern cloud environments and the default global configurations of many SaaS platforms. 

Many global cloud providers, while offering local compute and storage, still operate control planes and telemetry services from outside India. Their obligations under other countries’ laws, such as the US’ CLOUD Act and FISA 702, can also expose Indian data to foreign jurisdiction, explained NxtGen’s Rajgopal.

Default disaster recovery and backup configurations often lead to unintentional data replication abroad. Further, Shadow IT, where departments adopt SaaS tools without IT oversight, adds additional risk. Many times, enterprises often lack visibility into how and where metadata, logs, or APIs are routed, and some vendors hesitate to provide contractual guarantees for India-only data processing.

To stay compliant and avoid unintended data leaks, CIOs must take a proactive, multi-pronged approach to validate where their organization’s data truly resides. CIOs can also define Service Level Agreements (SLAs) that go beyond uptime and performance to specifically cover data residency. Increasingly, SLAs now include clauses on where data must be stored and processed.

“CIOs should conduct a comprehensive data flow mapping, tracking how data moves from ingestion to processing, storage, and backup. This includes examining whether data at rest and in transit remains within India, and identifying any exceptions, such as backups, disaster recovery (DR), or master data that may reside abroad,” said Sameer Jain, CEO of consulting firm Primus Partners Solutions. 

Ultimately, ensuring true data residency requires not just policy adherence but continuous oversight, vendor accountability, and architectural diligence.