Key Takeaways
- India will be among the first four countries to get local Microsoft 365 Copilot data processing by end of 2025.
- The move addresses data sovereignty concerns by keeping AI prompts and responses within national borders.
- Microsoft plans to expand this capability to 15 countries by 2026.
Microsoft is accelerating its data sovereignty efforts by enabling in-country data processing for its AI tool, Microsoft 365 Copilot. India will be among the first four nations to benefit from this initiative by the end of 2025, alongside Australia, Japan, and the UK.
This strategic move is designed to meet stringent regulatory and security requirements from governments and regulated industries worldwide.
How Local Data Processing Works
The initiative ensures that all customer AI interactions within Microsoft 365 Copilot—including user prompts and responses generated by Azure OpenAI models—will be processed and handled within local data centers during normal operations.
Microsoft stated this measure is primarily driven by enhanced security and regulatory compliance needs rather than performance improvements alone. By keeping sensitive AI data processing within national borders, the company offers customers greater control and helps them comply with increasingly strict local data protection laws.
Global Expansion Timeline
Following the initial deployment in four countries by end-2025, Microsoft plans to expand in-country processing to eleven additional nations in 2026:
- United States
- Canada
- Germany
- Italy
- Malaysia
- Poland
- South Africa
- Spain
- Sweden
- Switzerland
- United Arab Emirates
This expansion builds on Microsoft’s existing data residency investments, which already offer customers in 27 countries the option to store data locally and maintain regional data residency within the EU Data Boundary.
Background and Compliance Enhancements
The announcement follows a legal dispute earlier this year with India-based Nayara Energy, when Microsoft services were temporarily suspended due to EU sanctions.
In response, Microsoft has revamped its compliance framework and established a new council to engage with critical Indian sectors including energy, healthcare, and financial services, reinforcing its commitment to local market compliance.
