This isn't too surprising for business customers in Germany. According to the announcement, research shows that 76% of companies across all industries prefer to keep their data within the borders. Likewise, 65% of migrations to the public cloud want to use datacenters in Germany.
So the data storage in the Microsoft Cloud Germany will be restricted solely to their country's data centers. More specifically, the Office 365 Productivity Management suite is now available through Frankfurt/Main and Magdeburg. This information will be protected and controlled by the German Data Retractor T-Systems International GmbH and will be available to business customers in German, EU, and in the European Free Trade Area (EFTA).
Because there is such a tight grip on the data, even Microsoft doesn't have rights to retrieve data without the consent of the data receiver or the customers unless given strict limited-time permission. The security measures are necessary since much of the Office 365 Germany cloud is intended to be used for data sensitive areas such as the public sector, education, and the financial industry.