NSA snooping is hurting U.S. tech companies’ bottom line

There has been a lot of speculation that the revelations about NSA surveillance program PRISM damaged the credibility of U.S. tech companies, especially with international clients who were the primary targets of the snooping operation. But now it's starting to look like the snooping is hitting U.S.-based cloud providers where it really hurts: Their pocketbooks.


NSA snooping might mean stormy times ahead for U.S. cloud service providers. (NOAA Photo Library, NOAA Central Library; NSSL.)

Computer World UK reports a recent Cloud Security Alliance (CSA) survey found 10 percent of 207 officials at non-U.S. companies canceled contracts with U.S. providers after the leaks, and 56 percent of non-U.S. respondents are now hesitant to work with U.S.-based cloud operators.

This is bad news for U.S. tech companies because cloud computing and storage is a huge, expanding market. Research firm Gartner forecasts the public cloud services market will grow 18.5 percent in 2013 to a total of $131 billion worldwide.

Naturally, European cloud service providers were quick to recognize the opportunity represented by the leaks. Shortly after the news broke in June, Robert Jenkins, CEO at Swiss company CloudSigma, told IDG News Service the leaks would be "really damaging for U.S. companies in terms of competing abroad" while Johan Christenson, CEO of City Network from Sweden, noted "[t]here are a lot of customers that come to us because they want to store their data in Sweden."

European government officials also hopped on the bandwagon, with German Interior Minister Hans-Peter Friedrich telling reporters "whoever fears their communication is being intercepted in any way should use services that don't go through American servers" earlier this month.

Even before the NSA leaks, some international consumers were wary of U.S. cloud service providers based on what was known about the U.S. government's authority under the Patriot Act. At the Office 365 launch during the summer of 2011 Microsoft admitted E.U.-based cloud data hosted by the company was subject to the Patriot Act because the company functioned under U.S. law. The European Parliament noted these concerns in an October 2012 report about protecting privacy in the cloud.

FAQ: What you need to know about NSA surveillance and Edward Snowden

Andrea Peterson covers technology policy for The Washington Post, with an emphasis on cybersecurity, consumer privacy, transparency, surveillance and open government.
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