Vole wants its cloud services based in the UK beginning in 2016 and AWS will have it ready by the by the end of 2016 (or early 2017).
Vole is behind AWS in cloud services but the distance between the pair is huge.
Setting up in the UK makes a lot of sense. London’s status as a financial hub makes it attractive market for cloud vendors, and having a local region (composed of multiple data centres) mimimises latency.
Microsoft is a US corporation there may be circumstances when the US government can demand access to data. This is less likely to be possible if the data is kept in a local data centre.
If the US does succeed in getting court orders for the data stored in Europe chances are the EU would ban American companies running data centres. This would be too much of a political hot potato for the US government which is currently attempting to re-negotiate its safe-harbour status in Europe having lost it due to its spying antics.
Microsoft has the Ministry of Defence signed up as its first customer, which is probably why it has to have the data kept within the UK.
The department will be migrating to a “private instance” of Office 365, hosted partly by HP and in part by the new UK Azure region.