US tech sector feels pain from PRISM

Aug 27, 2013 by Rob Lever
A 'Secure Cloud Storage' drive is seen at the CeBIT, world's biggest IT fair, in Hanover, Germany, on March 3, 2011. Estonian President Toomas Hendrik last month urged the EU to develop its own cloud industry, noting that 95 percent of the services come from US firms.

Revelations about vast US data collection programs are starting to hit American tech companies, which are ramping up pressure for increased transparency to try to mitigate the damage.

An industry group, the Cloud Security Alliance said last month that 10 percent of its non-US members have cancelled a contract with a US-based cloud provider, and 56 percent said they were less likely to use an American company.

A separate report this month by the Information Technology & Innovation Foundation, or ITIF, a Washington think tank, said US cloud providers stand to lose $22 billion to $35 billion over the next three years due to revelations about the so-called PRISM program.

Daniel Castro, author of the report, says a loss of trust in US tech firms could lead to "protectionist" measures that hurt the fast-growing cloud sector.

"The risk is that a country like Germany will say you have to be a German company to provide data services in Germany," Castro told AFP.

"I don't think that helps anyone. We do benefit from free trade and the robust competitiveness in the tech industry."

The report notes that the United States dominates the market both domestically and abroad, and that US firms could lose between 10 and 20 percent of the foreign market in the next few years.

Tech companies, especially firms in cloud computing, have been in a frenzy since details leaked in June about surveillance efforts led by the secretive National Security Agency, including PRISM, believed to scoop up massive amounts of data as part of efforts to thwart terrorism.

This file photo shows people working on their laptops during an IT convention at the Berlin Congress Center in Germany, on December 27, 2011. Revelations about vast US data collection programs are starting to hit American tech companies, which are ramping up pressure for increased transparency to try to mitigate the damage.

Castro said in his report "the disclosures of the NSA's electronic surveillance may fundamentally alter the market dynamics."

The news "will likely have an immediate and lasting impact on the competitiveness of the US cloud computing industry if foreign customers decide the risks of storing data with a US company outweigh the benefits," he wrote.

Much concern in being expressed in Europe. Estonian President Toomas Hendrik last month urged the EU to develop its own cloud industry, noting that 95 percent of the services come from US firms.

"Recent months have proven once again that it's very important for Europe to have its own data clouds that operate strictly under European legislation," he said.

Some analysts say losses could be even greater than the ITIF predicts, if the fallout affects consumer-based services like email and search.

And Forrester Research analyst James Staten argued that, in addition to the loss of foreign customers, US customers may look overseas for cloud services, and the rest of the could also see an impact.

"Add it all up and you have a net loss for the service provider space of about $180 billion by 2016, which would be roughly a 25 percent decline in the overall IT services market," Staten said.

The tech sector has been active on several fronts, filing court cases and making public pleas to the US administration for more , in the hope that fuller disclosure will ease fears about how data is shared.

Six large high-tech lobby groups sent a letter to President Barack Obama this month asking for such steps, saying more transparency "can assist in reestablishing trust, both domestically and globally."

Ross Schulman of Computer & Communications Industry Association, one of the tech associations, said "the lack of information is compounding the trust problem."

Schulman said it's not clear if the volume of data collected by the government is more or less than people believe.

"If it's less, that could help trust," he said. "If it's more, people could have an informed discussion of surveillance practices."

But in the current situation, he said, "it's difficult to go to customers and say the cloud is the best place for your data."

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User comments : 6

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Restrider
2.3 / 5 (4) Aug 27, 2013
Serves them right.
Humpty
1 / 5 (5) Aug 27, 2013
What irks me is that very little surveillance for the keeping of necessary "Civil Order" is being done, and loads of corporation USA - "New World Order" nasty machinations - endless intrigues, the living within the surveillance society, - that has been going on for centuries...

Big uproar - lots of feigned outrage, business as usual - the smoke blows away.... and life goes on.

Business as usual....
antialias_physorg
3 / 5 (4) Aug 27, 2013
"The risk is that a country like Germany will say you have to be a German company to provide data services in Germany," Castro told AFP.

"I don't think that helps anyone.

Except german data service providers. It seems like this is a chance for small/national IT companies to flourish. Which wouldn't be such a bad ting as it would offset (in a very small part) the global monopolization efforts of some big companies.
VendicarE
1 / 5 (2) Aug 27, 2013
It is clear that America can't be trusted with any aspect of anything.

America is a nation of liars, cheats, murderers and thieves.

Flush.
rug
2 / 5 (4) Aug 27, 2013
Why don't you come over here and say that?
rwinners
not rated yet Aug 27, 2013
And Forrester Research analyst James Staten argued that, in addition to the loss of foreign customers, US customers may look overseas for cloud services, and the rest of the tech sector could also see an impact."<<<<<<<<<<<<

All tech is being hurt by this ongoing cesspool of spying. I won't use 'cloud' for any type of storage, except some pictures on Flickr. Low quality pictures, at that. That won't cost tech much,but a friend has told me that is company will not use the cloud... even for data backups.
However, I use email much less. The same goes for Facebook. I have no urge to explore the growing mass of other 'services' that all seem to want me desperately to use... and pay for.

It isn't really the shock of this intrusion, it is the shocking loss of trust I've found in the US government.

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