Microsoft to store some data in Germany over privacy concerns

Microsoft will store data for European cloud computing customers on servers run by a German company to reassure them that their data can’t be accessed by U.S. authorities.

It’s an admission from the company that tech firms will need to find new ways to satisfy overseas customers’ privacy concerns after a European Union court invalidated a key data safety pact.

{mosads}Microsoft said Wednesday that it would offer customers the option of storing their data in two server farms in Germany, likely in 2016.

In an unusual arrangement, the data centers will be under the control of Deutsche Telekom. Microsoft will not be able to access the data without first getting permission from the customer or Deutsche Telekom. The company will also supervise Microsoft’s access, if granted, to the data.

For German customers, it offers a guarantee that their data will stay in the country. The product is explicitly being pitched as a benefit for industries concerned about data privacy issues, including the financial and health sectors.

“Our new datacenter regions in Germany, operated in partnership with Deutsche Telekom, will not only spur local innovation and growth, but offer customers choice and trust in how their data is handled and where it is stored,” said Satya Nadella, Microsoft’s CEO, in a statement.

The service will likely begin in the second half of 2016, the company said, and is being offered to German customers as well as those elsewhere in the European Union or the four-member European Free Trade Association.

Microsoft’s new offering highlights the tech industry’s angst after a European court struck down a “safe harbor” pact between the European Union and the U.S. that made it easier for American companies to store European customer data stateside. Under the agreement, American companies could store the data in the U.S. as long as they pledged to abide with Europe’s stricter privacy standards.

With that option off the table, companies are hoping the countries involved reach a new deal or will consider storing more data in Europe. Microsoft seems to have chosen the latter route: it also announced this week that it would open its first data center in the United Kingdom. In addition to reassuring European consumers and companies, the data centers announcement Wednesday gives Microsoft some protection against accusations of violating privacy regulations.

European regulators said earlier this month that companies still had legal options that would allow them to transfer data across the Atlantic. And negotiators are said to be working on a new deal.

Germany, though, has already started to investigate the data transfer practices at companies like Google and Facebook — and some foresee other countries following suit.