Data centers as a key part of the digital economy. Challenges and new horizons

In this article we look at the importance of these data centers from a dual angle: first as a necessary element of the technology infrastructure of cloud service providers; and secondly, as a potential critical element of the performance of legal guarantee services based on digital certificates, including electronic identification.

Cloud services in the information and data economy

It is no longer news to anyone in 2024 that information is the most highly valued asset in the economy we are living in (we have dropped the adjective “digital” because the economy we are living in is or, is essentially, digital). The companies seen to be the top or largest in the world by any standard (gross revenue, profits, number of employees, market capitalization, etc.) built up their value on the basis of managing information and in many cases personal information only. This is how the names “information economy” or “data economy” came into use for today’s global economy.

In parallel to this reality there is another in the domain of operations, where the use of technology tools at companies, organizations and economic agents has moved and continues to do so from being on premise towards a new use in the form of cloud services.

We therefore have two undeniable realities: the existence of a highly valuable asset in the form of  data and the unstoppable bursting onto the scene of cloud services as the number one choice in the selection of technology solutions by economic operators.

Having established this we will now look at the relationship between data as a valuable asset, cloud services and a data center.

Data centers as a key part of cloud services

The name “Cloud services” has been one of the most successful in the history of marketing in the industry. If anyone is offered services “on the cloud” everything appears to be perfect. It creates the feeling that the client for technology services on the cloud has nothing to worry about, because they can continue to benefit from the whole technology service (be it software, a platform, infrastructure, or another) plus all problems disappear: no space or power is needed, no maintenance engineers are needed, there is no hardware gathering dust, no cooling or electricity is needed, the system no longer crashes, everything seems clean, aseptic, ethereal, light and so on. Furthermore, information no longer takes up space on our systems, it vanishes into thin air as if by magic and we have permanent and continuous access to it, without any risks. And the truth is, with a few tweaks for precision, this is all real, but not because the cloud service is an ethereal service provided from the troposphere. Far from it, a cloud service is provided via a connection on telecommunications networks between our systems and the provider’s technology infrastructure. That remote infrastructure is where the systems and information belonging to our business are stored and it is infrastructure built by the cloud services provider or for use by the cloud services provider. All this allows companies to use technology as a service and on demand, which gives it greater flexibility and enables it to channel the costs of using it as operating expenditure instead of as capital expenditure.

Had it not been marketed so successfully, what we now know as a cloud service could perfectly well have been named a basement service, because it involves hosting the technology infrastructure that gives us the service, as well as all the information that is stored and processed in that service, in a basement or a building owned by a third party. But that name would not be quite as appealing.

This shows, therefore, how the data center is a key part in the provision of cloud services and how, as the popularity of these services grows due to the advantages they bring, the need for space and hardware also increases. Whatever type of cloud services are to be provided (public cloud, hybrid, private) or whatever approach is taken for the data center (hyperscale for large providers, collocation for the middle market, edge for specialized services or close proximity and latency), this sector is upward moving with growing opportunities which are taking place under the rules and regulations on the digital economy.

Regulatory angle and value as a key asset for the economy

The data and information economy, or the economy in and from which we live is led by companies which, as we mentioned, built up their value on the direct or indirect management of information and data. Four of the five largest companies in the world by market capitalization in 2024 are digital or tech companies, six of the top ten. A large majority of the hundred largest companies in terms of capitalization are technologically dependent or make intensive use of cloud services.

As we have said, data centers are the infrastructure that stores hardware and key systems for providing cloud services. Bearing in mind that “the cloud” is not a cloud at all but a basement or a building, we can see how it is an essential part of economic flows in cloud services.

Moreover, data centers are always going to tend to be located close to the user, for both technology-related and regulatory reasons. From a technology standpoint, changes in certain solutions create the need for very low latency requirements, which is going to require closer proximity between the source of the data and of processing tools and the user. From a regulatory standpoint, for the European Union in particular, there is legislation that requires data to be kept and processed within the European Union, with very stringent requirements to be able to transfer that data outside the EU. These rules have had a growing effect, because many companies, especially those in critical sectors, require their cloud service providers to have the data stored within the European Union or even within the same country. If, as we have seen, the data center is the element of the cloud services where the data is stored, to meet those requirements it will have to be located in the same country or in the European Union.

This gives rise to other needs in the legal domain, because the location of a data center in a specific area, once we understand its importance, makes that infrastructure subject to the legislation applying to information security (in the EU, the NIS2 Directive, the DORA Regulation and other cybersecurity directives and regulations) or to data privacy (GDPR and sectoral legislation).

Future of the data center as part of the digital legal guarantee

The explanations given so far paint a clear picture of the value and importance of data centers in the economy, but there is more. We will finish with an idea of what will happen in the future although it is no less appealing and important than that discussed above.

The next station on the journey of the digital economy, of information or data is digital security and digital identification. As the traditional economy continues to move to, and settle on, the cloud, the necessary legal certainty in that domain needs to be firmly established to be equivalent to the certainty existing in the physical world. A key part is played in this process by identity proofing services using technology based on digital certificates, which in the European Union are regulated in the eIDAS and eIDAS 2 regulations.

These provisions state that identity proofing using qualified electronic certificates or proving digital events and documents using qualified time stamps have the same legal value as the same legal act performed in the physical world. To provide an example that will make this easier to understand, an agreement signed with a qualified digital signature (based on a qualified electronic certificate) has full legal value, and that signature is equivalent to a hand-written signature. It is also presumed to be authentic if challenged by third parties. Similarly, an electronic document (written, graphic, audiovisual, or other type) with an embedded qualified time stamp is enforceable proof with full legal value of the act contained in that electronic document, which is presumed trustworthy.

In this environment, deciding where to add those stamps and, especially, who is to add them is essential, because the participation of a regulated entity is needed, an officially qualified trusted third party who will issue those stamps with fulfillment of all the formalities and requirements laid down by the legislation for that act to have the maximum validity envisaged in the law. In this context, if issuing those stamps is added to the storage of information or the processing of that information at the data center itself, those data centers will become a directly inherent part of digital trust and of legaltech services which are the future of the economy.

This will require the necessary collaboration between regulated trust entities, issuers of qualified electronic certificates, and data center sponsors or managers. To increase the power of that alliance, law specialists need to be added advising on how to provide solutions to digital legal security issues, by adding a legal guarantee layer to the joint technological solution.

This article is designed to prompt reflection by the market with the future in mind and to prompt companies to ensure that they have the technology and legal advice they need to take them to that next station and set in motion the next stage of the route towards technological change on solid and solvent foundations.