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As governments and regulated industries across the globe grapple with the dual imperatives of technological innovation and regulatory compliance, a new blueprint for sovereign digital transformation is emerging from the UAE.
In a significant move, Microsoft and Core42 — a G42 company specialising in sovereign cloud and AI infrastructure — jointly released a comprehensive whitepaper titled “ Balancing Innovation and Compliance in the AI Era”.
The paper offers both a call to action and a strategic playbook for technology leaders navigating the challenges of data sovereignty, cloud adoption, and AI deployment in highly regulated sectors.
Bridging innovation and regulation
The central message of the whitepaper is clear: modern sovereign-enabled public cloud solutions — like the Core42 Sovereign Public Cloud powered by Microsoft Azure — eliminate the traditional trade-off between innovation and compliance.
By blending Microsoft’s hyperscale infrastructure with Core42’s ‘Insight’ platform for sovereign controls, the offering creates a secure, compliant, and highly scalable environment tailored for sectors such as government, healthcare, finance, and energy.
“This collaboration is designed to empower UAE organisations to harness the full potential of AI and cloud capabilities while ensuring data sovereignty and regulatory compliance,” said Sherif Tawfik, chief partnership officer – AI & Cloud for Sovereignty, Microsoft.
The case for sovereign public cloud
The paper presents sovereign cloud not as an optional enhancement, but as a foundational necessity for national data protection, security, and operational control — especially as AI adoption accelerates.
According to IDC, UAE public cloud spending reached $2.95bn in 2024 and is forecasted to soar to $6.47bn by 2028, growing at a CAGR of 21.7 per cent.
The same study identifies AI and cloud as the top two investment priorities for UAE organisations in 2025.
In regulated sectors, where data residency, encryption, access control, and compliance reporting are non-negotiables, sovereign-enabled public clouds stand out.
The Core42–Microsoft solution addresses these needs through:
- In-country data centres
- Pre-configured regulatory policy packs
- Advanced encryption and confidential computing
- Automated compliance monitoring
- Integration with national security operations
Transformative use cases across industries
The whitepaper highlights real-world UAE-based use cases demonstrating how sovereign public cloud adoption enables sector-specific transformation:
Finance: AI-powered fraud detection and compliance management in line with CBUAE, ADGM, and DIFC standards.
Healthcare: Predictive diagnostics and secure EHR systems integrated with Nabidh and Malaffi platforms.
Government: Citizen data protection, digital identity services, and AI-native public service delivery.
Oil and gas: Real-time analytics, supply chain optimisation, and secure handling of sensitive geospatial data.
These examples underscore that sovereign clouds are not just secure — they’re also transformative.
“Our collaboration with Microsoft ensures that we provide a cloud environment that fosters innovation while upholding the highest standards of data sovereignty,” said Adrian Hobbs, chief technology officer, Core42.
A national mission: The UAE’s sovereignty-first strategy
The sovereign public cloud initiative aligns closely with the UAE’s broader digital ambitions. Abu Dhabi is investing Dhs13bn in its goal to become the world’s first fully AI-native government by 2027.
Supporting over 11 million digital interactions daily between government, citizens, and businesses, the sovereign cloud platform developed by Core42 and Microsoft is a pillar of that transformation.
The whitepaper also forecasts that global spending on sovereign cloud solutions will nearly double from $133bn in 2024 to $259bn by 2027 — a clear signal that digital sovereignty is becoming a strategic imperative worldwide.
Strategic guidance for tech leaders
In its final section, the whitepaper outlines a framework for CIOs and CTOs to transition confidently to sovereign cloud environments.
Key steps include:
1. Classifying data according to UAE’s Smart Data Framework (open, confidential, secret, top secret)
2. Prioritising workloads based on sensitivity and compliance requirements
3. Measuring KPIs such as uptime, latency, and security incidents
4. Selecting sovereign-ready providers with a track record in compliance, innovation, and local regulatory alignment
A future-proof cloud for a sovereignty-first era
Microsoft and Core42’s partnership has crystallised into more than infrastructure — it is an enabling ecosystem for AI-native, secure, and compliant digital transformation.
Their sovereign public cloud aims to empower UAE institutions to innovate with confidence, knowing their data is secure, governed, and fully under national control.
As digital regulation and AI adoption grow hand in hand, the UAE’s model offers a path forward: sovereignty without compromise.
