The hidden risk in SaaS: Why companies need a digital identity exit strategy
In the face of sudden trade restrictions, sanctions, or policy shifts, relying on SaaS providers outside your region for identity services is a gamble that companies can no longer afford to take.
With trade disputes set to escalate, a sudden policy change could result in SaaS providers pulling out of regions or being forced to comply with new regulations that render identity services inaccessible. While software companies have yet to be put in the crosshairs, such policies are not unprecedented.
Western sanctions on Chinese technology firms, US restrictions on cloud services for certain foreign entities, and Europe’s increasing emphasis on data sovereignty are clear indicators that digital infrastructure is no longer immune to geopolitical tensions. Companies need to know where their data is stored as this increasingly has regulatory implications. Companies need to take a hard look at their SaaS dependencies now, before regulators or political tensions force them into an unplanned, high-risk transition.
Implement a “+1 strategy” for identity
Manufacturers learned a hard lesson when global supply chains were disrupted by trade wars and the pandemic: over-reliance on a single supplier is a liability. This is why many companies adopted a “+1 strategy,” establishing secondary production sites outside of China to ensure continuity. The same principle should apply to digital identity.
If an organization relies on a single cloud-based host for its identity systems, it is exposed to a single point of failure. Implementing a hybrid or multi-cloud identity strategy mitigates this risk. Maintaining an on-premises identity system or deploying a secondary provider in a different jurisdiction will ensure operational resilience. This diversified identity approach will guarantee that even if a major provider is disrupted, authentication and access controls remain intact.
Regain control over identity infrastructure
To reduce dependency on external SaaS providers, organizations should consider taking back control of their digital identity infrastructure. This doesn’t mean abandoning cloud services altogether, but rather strategically deploying identity management solutions that provide ownership and portability.
Self-hosted identity solutions running on private cloud or on-premises environments can offer greater control. Businesses should also consider multi-cloud identity architectures allowing authentication and access control to function across different cloud providers. Adopting these hybrid models will enable organizations to retain core authentication services in-house while leaving non-critical identity services in the cloud.
Whilst there are a few different approaches here, the key is to ensure that authentication and access management systems remain portable and adaptable, avoiding vendor lock-in.
Stress-test digital defenses
A solid exit strategy isn’t just about having alternatives; it’s about knowing they work. Just as organizations conduct regular disaster recovery drills, they must also stress-test their identity infrastructure.
For instance, simulating disruptions by temporarily cutting off access to the primary identity provider can reveal previously unconsidered vulnerabilities. Measuring recovery time will also help organizations understand how long it would take to restore authentication services if the main provider is suddenly unavailable. Another vital step is building redundancy into authentication systems to ensure that failovers activate seamlessly in the event of an outage or regulatory shutdown.
A combination of tests should be conducted periodically to ensure IT teams are prepared for potential real-world disruptions.
Future-proof against regulatory whiplash
As previously mentioned, laws governing data sovereignty and cloud services are constantly evolving. The European Union continues to strengthen its stance on keeping sensitive data within its borders, China enforces strict data localization laws, and countries like India are now introducing regulations that could limit reliance on foreign tech firms. Compliance today does not guarantee compliance tomorrow.
Organizations must closely monitor data sovereignty laws and adjust their infrastructure accordingly. Ensuring that identity solutions comply with shifting regulations will help avoid legal and operational risks.
To avoid being caught off guard, it’s important for IT teams to understand what’s going on behind the scenes rather than entirely outsourcing their infrastructure. For the highest level of preparedness, organizations can manage identity infrastructure systems themselves, reducing reliance on third party SaaS companies for critical functions. If teams understand the inner workings of their identity management, they will be better placed to develop an emergency response plan with predefined steps to transition services in case of sudden geopolitical changes.
Don’t wait until it’s too late
The writing is on the wall. For years, geopolitical tensions have been steadily reshaping the tech sector. With this trend only accelerating with Trump’s second presidency, it’s a real possibility that cloud service providers will be impacted next. For those reliant on such services, a failure to adapt risks being caught off guard. A digital identity strategy that prioritizes resilience, flexibility, and control is no longer optional – it’s a business necessity.
By implementing a hybrid identity approach or self-hosting identity solutions, stress-testing infrastructure, and staying ahead of regulatory shifts, organizations can future-proof their authentication and access management systems. The companies that take proactive steps today will be the ones best positioned to navigate the next wave of geopolitical uncertainty.