Exposure Of NSA Spying Programmes Could Damage The US Cloud Industry

Research by the Information Technology and Innovation Foundation (ITIF) suggests that the US cloud computing industry could lose as much as $35 billion (£22.5b) over the next three years as a result of information leaked by former National Security Agency (NSA) consultant Edward Snowden.

ITIF says that even before the existence of projects like PRISM, XKeyscore and Tempora came to light, some European cloud providers used the US Patriot Act to scare customers away from their American competitors. The same companies are sure to jump at the opportunity to benefit from the current uncertainty about data protection laws in the US.

“Immediate and lasting impact”

Today, the US companies such as Amazon, Microsoft, Google and Rackspace dominate the cloud computing market across the world. According to ITIF, it is these companies that stand to suffer most from information disclosed by Snowden.

The organisation estimates that the global enterprise public cloud computing market will be worth $207 billion (£133b) by 2016. And European cloud providers like Dimension Data or CloudSigma are well-positioned to bite off a bigger piece of this pie, at a time when barely a day passes by without NSA making the headlines.

It’s not just the private sector that has its eyes set the rapidly growing cloud market. A European Commission paper on cloud computing published in 2012 proposed a single set of cloud standards across Europe, special certification for cloud providers and other measures to improve competitiveness of the domestic industry. “This strategy is about building a new industry, and better competing against the United States in particular,” wrote the Commission.

Now, several European politicians have openly encouraged the local companies to use local services. “Whoever fears their communication is being intercepted in any way should use services that don’t go through American servers,” said German Interior Minister Hans-Peter Friedrich, quoted in the report.

“The impact of PRISM on US companies may be particularly acute because cloud computing is a rapidly growing industry. This means that cloud computing vendors not only have to retain existing customers, they must actively recruit new customers to retain market share,” writes ITIF.

“Global spending on cloud computing is expected to grow by as much as 100 percent between 2012 and 2016, whereas the global IT market will only grow by 3 percent. If US companies lose market share in the short term, this will have long-term implications on their competitive advantage in this new industry.”

According to the report, by modest estimates, US cloud computing providers might lose 10 percent of their overseas business, or $21.5 billion, over the next three years. In the worst case scenario, they will lose 20 percent, or $35 billion.

ITIF based these numbers on a recent survey by Cloud Security Alliance, which found 10 percent of non-US respondents had cancelled a project with a US-based cloud computing provider, and 56 percent said that they would be less likely to use a US-based cloud computing service. Meanwhile, 36 percent of respondents based in the US said that the NSA leaks made it more difficult for them to do business overseas.

“If U.S. firms are to maintain their lead in the market, they must be able to compete in the global market. It is clear that if the U.S. government continues to impede U.S. cloud computing providers, other nations are more than willing to step in to grow their own industries at the expense of U.S. businesses,” concludes ITIF.

Meanwhile, Snowden has been granted temporary asylum in Russia, after the country refused to extradite the whistleblower to the US, where he is facing charges of espionage and theft of government property.

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