Research

Digital Era Continues To Make Things More Complicated With The Regulatory Systems

November 15
6:00 AM 2016

Global internet traffic is predicted to nearly triple over the next five years, driving billions of dollars of investment in the construction of new data centres that enable our digital lives.

The majority of Australian companies prefer data centre providers with a domestic presence for reasons of security, performance and regulation. Major public cloud providers are taking steps to expand their global reach and place infrastructure within Australia's jurisdiction to allay consumer and community concerns about where their data resides. The preference for onshore data storage is market-led and is helping drive the growth in local IT infrastructure investment.

The recent McKinsey Global Institute report, Digital Globalisation: The New Era of Global Flows, found that in 2014 alone data flows generated roughly $US2.8 trillion in value. McKinsey projects that the consumption of cross-border bandwidth will increase nine times over the next five years.

The digital economy offers advantages for international trade, allowing new markets to be accessed with less capital investment than before. It supports the global digital platforms that provide us with education, employment and business networks. At the same time our society is adapting to cope with the disruptive influence of mobile, our digital economy is bypassing traditional administrative boundaries.

Legal and regulatory systems are struggling to keep up with innovation. Consider Facebook, the largest media company in the world, doesn't own any content. Uber, the biggest transport company, doesn't own cars. We grant them access to our data, insights into our preferences, location and social experiences.

PayPal come to dominate the growing online payments business without the bricks-and-mortar presence of traditional financial institutions. Again, technology is allowing organisations to disrupt existing exchange systems. The Commonwealth Bank and Wells Fargo recently publicised an open account transaction that combined Blockchain, smart contracts and IoT. When the goods reached a certain point in transit, remote sensors confirmed their geographic location and payment notification was sent out.

Inevitably, the interaction of conflicting jurisdictions creates friction. One of Microsoft's mega-facilities in Ireland was found to be storing the private data of a defendant in a criminal case. Microsoft was successful in fighting US authorities' attempts to obtain the data, based on an argument it could be detrimental to US-based IT companies' expanding cloud business with international clients.

Considering the central position enjoyed by US companies in the global IT industry, issues of jurisdiction and security of data will continue to impact organisations' IT strategies, regardless of the policies of individual governments.

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