Moscow has just made waves by trying to tell web services at personal data of local Russians needs to be stored on Russian soil – see: Moscow seeks to tighten grip online (it’s an FT link which is behind a paywall, but surely a search will find similar articles).
Not long ago, Brazil tried to do this, but the idea was quickly scrapped. The FT take is that this is a means of trying to control citizenry. And of course it’s deadly costly to companies like Google or Facebook.
I don’t see it that way (though it may very well be the main motivator). Keeping local data in local data centers can mean a lot for a country.
One of the strong points of the open source economy is that there is sovereignty preserved. It’s a selling point. Keeping data local (I.e. Shards of data) means that he data doesn’t leave the borders. It keeps it out of prying eyes of international spy agencies. It also means faster access for local citizenry – you can’t beat faster than a local DC.
What else is good with such a move? Instead of just edge nodes being run by several engineers, you get the full benefit of more jobs being created and more data centers being operated.
Yes, the costs go up for international companies. Also there’s a barrier to entry or immediate expansion into said markets. Middlemen who partner with these foreign companies will definitely likely reap some rewards – think of the franchise model (recent examples have KakaoTalk in Korea, with local partnerships say in Malaysia).
But it may also prove to spur local entrepreneurship. You create local clones of services, and maybe one day there is an exit to the international company (think group buying clones and Groupon). Or like in China you create new classes of millionaires and billionaires (by censoring and blocking foreign websites).
Today with the cloud as a back end, people in Korea ask why their data is stored in Tokyo or Singapore points of presence (taking the Amazon example). Why do Malaysians have to only benefit from edge locations and a small employee base and data centre usage, with all major data stored in Singapore?
Friendly (efficient) nations thus lose monopolies on being regional hubs. Who suffers? The shareholders of these international firms (increased cost of doing business – policy wonks, more operations, etc.). But when you’re a large market like Brazil, Russia, or China, shareholders will demand that you not only enter, but conquer those markets – valuation is added for growth potential.
Overall I’m not entirely sure this proposal is a bad idea from a local economic standpoint.