Data residency in Malaysia’s digital future
Your data is your most valuable business asset. Yet when it’s scattered across various locations, or worse, you don’t know exactly where it is, maintaining complete control is difficult. The consequences go far beyond IT departments, affecting everything from regulatory compliance and customer trust to business operations. Data residency has become a pressing issue in Malaysia, where regulatory requirements are tightening and businesses are rushing to adapt. The recent announcement of Microsoft’s new data centre in Malaysia marks a critical shift in how businesses approach data protection and compliance, and accelerate their digital transformation
What is data residency, and why does it matter?
Data residency refers to the physical location where your organisation stores and processes data. It determines which laws apply, the necessary security measures, and how well your organisation can use it to make business decisions. Understanding data residency is important for organisations handling personal or sensitive information, especially in regulatory sectors like financial services, healthcare, and public services.
Why data residency matters
Data residency involves more than storing data in a specific place. Here are reasons it matters:
- Privacy protection: Data residency enables you to protect personal and sensitive information according to local privacy laws and international standards. When you know where your data lives, you can better protect it.
- Regulatory compliance: Proper data residency protects organisations from legal penalties, brand damage, and financial losses. Your organisation must follow data protection laws, like Malaysia’s Personal Data Protection Act (PDPA) and sector-specific regulations, such as Bank Negara’s Risk Management in Technology (RMiT) guidelines for financial institutions.
- Security control: Knowing your data’s exact location means you can directly monitor and enforce security measures. This reduces risks of unauthorised access or breaches.
- Performance optimisation: Storing data closer to your users reduces latency, improves application responses, and enhances the user experience.
Current data residency challenges in Malaysia
While the concept of data residency is straightforward, challenges arise when data spans various locations. Organisations often use multiple cloud providers that manage data across different regions or countries, while others maintain hybrid environments with both on-premise and cloud storage. These situations create a perfect storm of data challenges.
1. Compliance and regulatory complexity
Managing data across multiple locations means complying with different country-specific regulations. This requires continuous monitoring, regular audits, and detailed tracking of data locations.
Recent amendments to Malaysia’s PDPA introduced stricter requirements, such as mandatory data breach notifications, appointment of Data Protection Officers, and new rules for cross-border data transfers. Each regulatory update forces organisations to revise their compliance practices, documentation, and technical setups. Complexity increases when different jurisdictions have conflicting data protection standards, creating confusion about applicable laws. Non-compliance has serious consequences. Organisations may face regulatory penalties and fines, complex auditing and reporting, and operational restrictions in certain markets.
2. Performance and latency issues
When your data is stored thousands of kilometres away from your users, latency is inevitable. Data transfers can become delayed during peak usage periods, slowing application response and reducing reliability. For financial institutions, such latency can lead to failed transactions or late payments. In healthcare, slow access to patient records can delay urgent medical decisions, impacting patient care outcomes.
3. Security concerns
Ensuring consistent security standards is harder when data spans multiple jurisdictions. Cross-border transfers often require multiple layers of approval and additional security measures. Each transfer increases the risk of unauthorised access or data breaches. If a breach occurs, identifying compromised data takes time and slows response and recovery.
Consider the ransomware attack on KLIA on March 23, 2025. The incident led to operational disruption and a $10 million ransom demand. Such attacks demonstrate how cyberattacks target critical infrastructure and the need for strong security controls. Security breaches damage brands and erode customer trust. They often trigger regulatory investigations, resulting in fines and financial losses on top of operational disruptions.
4. Cost and operational impact
These challenges come with visible and hidden costs. Managing distributed data involves investing in compliance management, performance optimisation, additional security, and specialised expertise. Multiple compliance frameworks demand separate tools and processes, while different regions may have varying operational requirements.
Complex governance processes slow decision-making, turning quick approvals into lengthy procedures with many compliance checkpoints. Disaster recovery and business continuity plans become more difficult, requiring duplicate backup systems and redundant infrastructure.
These invisible costs could extend to maintaining duplicate storage, redundant security tools, and the productivity drain due to managing these complexities.
Microsoft’s data centre investment: New opportunities for Malaysian businesses
Microsoft’s investment in Malaysia provides a timely solution. The Malaysia West cloud region that launched on 28 May 2025 in Greater Kuala Lumpur represents an opportunity for Malaysian businesses to address data challenges. This new cloud region will provide access to Microsoft’s trusted cloud technologies, local data residency, regulatory compliance, and improved resilience. It enables organisations to manage data securely and efficiently. Here’s what you can expect:
1. In-country data residency
Your data physically stays within Malaysia’s borders. This is a critical requirement for government agencies, financial services institutions (FSI), and oil and gas companies (O&G) that need to store sensitive data locally for regulatory, privacy, and security reasons.
Local data residency simplifies compliance with Malaysian laws, reduces cross-border transfer risks, and supports efficient data management.
2. Local and international compliance
Microsoft’s new data centre complies with local regulations, such as Malaysia’s PDPA, and global standards, like the Health Insurance Portability and Accountability Act (HIPAA), for healthcare information. This dual compliance capability helps your business meet obligations, reduce risks, avoid penalties, and build customer trust.
3. Low bandwidth latency
The data centre’s presence in Malaysia significantly reduces latency. The result is faster application and service response times. This speed boost is crucial for real-time applications, financial transactions, and customer-facing digital services where milliseconds matter.
4. Advanced resilience with 3+0 architecture
Microsoft’s data centre uses a 3+0 architecture, featuring three active data centre zones and no passive backup zones. Such architecture improves resilience and uptime. If one zone experiences issues, the others continue to operate, minimising service disruptions and ensuring business continuity.
5. Improved data protection with local backup solutions
Data protection upgrades with secure local backups using leading solutions from Crayon’s ecosystem of vendors. This setup provides essential support for disaster recovery and business continuity.
Organisations, especially in sectors like financial services, can quickly secure and recover data during incidents or disruptions. This integration aligns with regulatory expectations and simplifies operational management.
6. Enterprise-grade security infrastructure
Enterprise-grade security at the data centre addresses key concerns organisations face when migrating workloads to the cloud. It provides a secure and trusted environment to protect sensitive data from cyber threats, building customer confidence and supporting compliance with security standards.
Optimising your data residency strategy with Crayon
Access to world-class infrastructure is only the first step. Optimising your data residency strategy requires a thoughtful approach that aligns with your compliance needs and business objectives. Crayon offers end-to-end cloud migration services using a clear, four-step methodology to guide organisations through this journey.
- Assess: Analyse the current infrastructure to form a personalised cloud strategy.
- Plan: Create a detailed roadmap with our consultants for a smooth transition.
- Implement: Migrate to Azure, AWS, or GCP, optimising cost, performance, and security.
- Operate: Provide ongoing support for optimal cloud environment management.
We also apply the 7Rs methodology to guide workload migrations:
- Relocate: Move or copy applications ‘as-is’ to the cloud without extensive changes.
- Rehost: Rebuild applications in the cloud with minimal adjustments.
- Replatform: Redeploy with configuration or component changes to optimise cloud deployment.
- Repurchase: Replace existing software with cloud-ready SaaS solutions or commercial products.
- Refactor: Modify underlying code to enhance cloud readiness.
- Retain: Keep certain applications in their existing environment rather than migrating.
- Retire: Remove unnecessary applications or consolidate their functions elsewhere.
This structured approach helps you fully utilise Microsoft’s new data centre capabilities to meet specific business needs. With Crayon’s guidance, you can confidently manage your data residency without uncertainty over security or compliance.
Preparing your organisation for Malaysia’s data residency future
Managing scattered data creates more challenges than you might think, introducing compliance complexity and increasing security vulnerability. Data residency now becomes a fundamental business requirement to protect information, comply with regulations, and optimise performance.
The launch of Microsoft’s Malaysia West data centre provides a powerful solution for Malaysian organisations: enhanced security, compliance, and performance through local data storage. You can now build trust, improve user experience, and reduce the costs and complexities of data management.
Is your organisation ready to take advantage of these new possibilities? The first step is understanding your current data landscape. Contact Crayon today for a data strategy assessment.
