Microsoft lets European users sever Azure phone line, boosting data sovereignty

Microsoft announced that Azure Local can now run entirely offline, eliminating the need for any periodic “phone‑home” communication with Azure Arc. The change was unveiled at the London stop of the company’s AI tour and is aimed at European customers who demand full data‑sovereignty amid growing transatlantic friction, The Register reported. Previously, Azure Local – the on‑premises evolution of Azure Stack HCI – required cloud connectivity for management and would degrade after 30 days without it. By decoupling the management plane, Microsoft says organizations can now “run mission‑critical infrastructure with Azure governance and policy control, with no cloud connectivity,” a move that directly addresses concerns that U.S. authorities could access data under the CLOUD Act.

The offline capability is part of a broader push that began with Microsoft’s EU Data Boundary service, launched in March 2025, and expanded with additional features in November, according to The Register. The company has also introduced Microsoft 365 Local – on‑premises versions of Exchange, SharePoint and Skype for Business – and a “Foundry Local” offering that brings enterprise AI inference and APIs into isolated environments. These products are positioned as “digital bunkers” for sovereign, classified or otherwise isolated workloads, allowing customers to keep data within European borders while still leveraging Microsoft’s governance tools.

European industry groups have welcomed the development. Francisco Mingorance, secretary‑general of the cloud‑provider association CISPE, told The Register that the new services align with the organization’s long‑standing advocacy for sovereign cloud options. “Sovereignty is increasingly a requirement, and we welcome any new services, tools, and software that can run in European Cloud Infrastructure Services Providers’ datacenters,” he said. CISPE plans to test the offerings against its forthcoming Sovereign Cloud Services Framework to determine whether they merit a “Sovereign” or “Resilient” badge. The framework, still under development, will evaluate technical controls, data‑location guarantees and the ability to operate without external dependencies.

Despite the technical advances, analysts caution that Microsoft’s assurances may have limits. The Register noted that Microsoft admitted in France last year it could not guarantee absolute sovereignty if compelled by U.S. law to hand over data. Reuters has similarly warned that European regulators will struggle to force Big Tech off U.S.‑controlled clouds, underscoring the difficulty of achieving true data autonomy. The offline Azure Local model mitigates the risk of remote access but does not change the fact that the underlying software remains proprietary and subject to U.S. jurisdiction.

The move also reflects a competitive dynamic with other hyperscalers. Google has been vocal about its own “sovereign cloud” initiatives, and the Verge has highlighted an ongoing “war” between the two giants over European market share. By offering a fully disconnected stack, Microsoft hopes to retain customers who might otherwise migrate to open‑source or non‑U.S. platforms – a trend ZDNet has documented among European military and government agencies that have recently abandoned Microsoft for alternatives. Whether the offline Azure Local solution will be enough to stem that outflow remains to be seen, but it marks a clear escalation in Microsoft’s strategy to address data‑sovereignty concerns while keeping its ecosystem locked within its own product suite.