Microsoft is building two cloud data centres in the UK next year.
Consumers should also benefit from faster running apps.
The announcement, made by Microsoft chief executive Satya Nadella in London, follows a similar declaration by Amazon last week.
The two companies vie to provide online storage and data crunching tools via their respective platforms Microsoft Azure and Amazon Web Services.
The companies’ latest efforts should address highly regulated organisations’ privacy concerns.
In a related development, the firm has also announced plans to offer its Azure and Office 365 cloud services from two German data centres controlled by a third-party, a subsidiary of Deutsche Telekom.
“Microsoft will not be able to access this data without the permission of customers or the data trustee, and if permission is granted by the data trustee, will only do so under its supervision,” it said.
The move will make it even harder for overseas authorities to gain access to the files.
Microsoft is currently engaged in a legal battle with the US Department of Justice, which is trying to make it hand over emails stored on a server in Ireland – the tech firm says the government is trying to exceed its authority.
Mr Nadella announced the plan to open a data centre near London and another in elsewhere in the UK – whose location has yet to be named – in 2016.
They will bring the company’s tally of regional data centres to 26.
He added Microsoft had also just completed the expansion of existing facilities in Ireland and the Netherlands.
“It really marks a huge milestone and a commitment on our part to make sure that we build the most hyperscale public cloud that operates around the world with more regions than anyone else,” he told the Future Decoded conference.
Scott Guthrie, Microsoft’s cloud enterprise group chief, added that the move would address privacy watchdogs’ concerns about “data sovereignty”.
Amazon has also committed itself to multiple UK data centres, but has not said how many at this stage. It will make the UK its 15th regional base.
Although that is fewer than Microsoft’s, the company is currently the global leader in this field in terms of market share.
Announcing its move, Amazon said an added benefit of having a local data centre was that the public would experience less lag when using net-based services.
Amazon’s other EU-based data centres are in Ireland and Germany.
Although outsourcing computing work to one of the big tech companies offers the potential for savings – as they do not have to build and maintain their own equipment – there are also risks involved.
A fault with Azure knocked many third-party websites offline last year, and Amazon has experienced glitches of its own. However, major faults taking clients’ services offline are a relatively rare occurrence.