Global CIOs have spent much of the past decade consolidating their infrastructure. The goal was to flatten the stack to one directory, one security perimeter, and one contract for the entire multinational workforce.
In 2026, they will be spending millions of dollars to dismantle all of this.
The conflict between aggressive American protectionism and entrenched European data sovereignty has led to changes in enterprise architecture. We are no longer building an integrated global system. We are building a “federated” infrastructure: two different stacks connected by a thin identity management layer.
On April 8, 2025, the U.S. Department of Justice’s ‘bulk data transfer’ regulations went into effect. While the EU has spent years improving its “digital sovereignty” framework through the Digital Markets Act (DMA), the United States has largely maintained an open borders policy for data.
The new DOJ rules change the standards. It restricts the transfer of “large quantities of sensitive personal data” to “countries of interest.” For global companies, this has created a compliance paradox. The EU requires data to be kept local to protect citizens from external surveillance. The United States now requires data to remain local to protect national security.
Baker Donelson legal experts John S. Ghose and Vivien F. Peaden identified this as a significant turning point for corporate risk in a September 2025 briefing.
“DOJ’s new bulk data access rules…represent a sea change in how U.S. businesses must manage cross-border data flows.. In-house lawyers now must navigate a complex regulatory regime that has far-reaching implications for day-to-day business operations.”
These “wide networks” entangle standard IT operations. A unified Global Address List (GAL) or central HR helpdesk can now trigger a breach if data moves across the wrong geographic boundary.
“Sovereignty Tax” on Procurement
Maintaining a compliant global presence in 2026 will impose significant digital sovereignty taxes, primarily due to the decoupling of vendor licensing models.
Microsoft’s unbundling of Teams provides the clearest case study. On September 12, 2025, Microsoft agreed to permanently separate Teams from its Office suite globally to resolve an EU antitrust investigation.
However, while this action did not result in any fines, it did cause significant disruption to procurement strategies. The new licensing structure, which took effect November 1, 2025, forced CIOs to choose between regional SKUs or a more expensive “global standard” that rebundles software at a premium price.
Withum’s analysis shows that the widening price gap is creating a disadvantage for organizations trying to maintain uniform licensing standards across all geographies.
But for competitors, this fragmentation is a feature rather than a bug. Niko Fstiropoulos, CEO of alfaview, the German company that first filed the complaint, told Reuters the separation was a necessary step toward European independence.
“This sends an important signal about Europe’s digital sovereignty. Fair market conditions not only promote technological diversity, but also secure the long-term innovative power of European markets.”
Three Models for the Era of “2-Stack” Digital Sovereignty
Faced with incompatible regulatory regimes, Fortune 500 leaders are adopting one of three architectural strategies:
1. Regionalist (financial services)
Strategy: Hard separation.
Banks and insurance companies cannot afford ambiguity in the definition of “bulk data.” The DOJ rule sets the threshold for sensitive financial data at 10,000 Americans. This is a low bar for multinational banks.
These organizations are completely fragmenting their infrastructure. We leverage AWS European Sovereign Cloud for our EU operations and standard commercial regions in the US.
In an interview with CIO.com, Doug Gilbert, CIO and CDO at Sutherland Global, noted that the regulatory deadline of the end of 2025 has forced them to do something about data residency.
“Countries like the UAE with strict data residency laws have had to reevaluate where they store sensitive information.”
The trade-off is operational overhead. Running two different clouds eliminates the risk of cross-border breaches, but increases infrastructure spending by approximately 20-30%.
2. Standardization tools (pharmaceuticals and life sciences)
Strategy: Absorb costs.
For industries that rely on global R&D collaboration, data silos are an existential threat. These companies are choosing to pay a premium for integrated licensing and legal coverage to maintain a single stack.
They purchase “unbundled” licenses globally and implement strong encryption and legal safeguards to justify data transfers. But this model is becoming increasingly fragile. Sabastian Niles, President and CLO of Salesforce, called the EU agreement a “significant step forward” in implementation, suggesting that vendors will continue to face pressure to localize rather than standardize.
3. Hybrid (Technology and SaaS)
Strategy: federated ID, local data.
This is the emerging standard for 2026. This means that the data resides in its original region (US data in US data centers, EU data in EU sovereign clouds), but the identity and metadata are federated. This allows users in Berlin to “see” documents in New York without technically moving the files across the border until certain compliance checks are passed.
Smit Shanker, global CIO at Xebia, told CIO.com that IT leaders should prioritize “selectivity,” or the ability to separate regions if regulations become more stringent.
“The future is expected to see more stringent data localization requirements, more detailed regulations, and greater control over digital assets.. Enterprise IT must therefore evolve from an efficiency focus to sovereign resilience.”
Selectivity is the new efficiency
The lesson of the 2026 audit cycle is that efficiency is no longer the primary metric for network architecture. It’s resilient.
Snowflake CIO Mike Blandina warns that this is not a temporary shift, but a long-term change.
“As data becomes central to economic policy, national security, and innovation, digital sovereignty will become increasingly important.”
“Two-stack” companies are heavy, expensive, and difficult to manage. But in a world where Washington and Brussels are pulling digital maps in opposite directions, it is also the only architecture that guarantees survival.