Snowden revelations costly for US tech firms, study says

June 9, 2015 by Rob Lever
US National Security Agency whistleblower Edward Snowden speaks via live video call during the CeBIT technology fair in Hanover, Germany, on March 18, 2015

US technology companies are getting hit harder than anticipated by revelations about surveillance programs led by the National Security Agency, a study showed Tuesday.

The study by the Information Technology and Innovation Foundation, a Washington think tank, said the impact would be greater than its estimate nearly two years ago of losses for the sector.

In 2013, the think tank estimated that US cloud computing firms could lose between $22 billion and $35 billion in overseas business over three years.

It now appears impossible to quantify the economic damage because the entire sector has been tarnished by the scandal from revelations in documents leaked by former NSA contractor Edward Snowden, the report said.

"These revelations have fundamentally shaken international trust in US tech companies and hurt US business prospects all over the world," the report said.

Study co-author Daniel Castro said the impact is now open-ended, with the NSA scandal having tarnished a wide range of US .

Since 2013, he said, "we haven't turned this around: it's not just cloud companies. It's all tech firms implicated by this," he told AFP.

"It doesn't show any signs of stopping."

The National Security Agency headquarters at Fort Meade, Maryland, on January 29, 2010
The National Security Agency headquarters at Fort Meade, Maryland, on January 29, 2010

The report said foreign customers are increasingly shunning US companies, and governments around the world "are using US surveillance as an excuse to enact a new wave of protectionist policies."

One survey cited by the researchers found 25 percent of businesses in Britain and Canada planned to pull company data out of the United States as a result of the NSA revelations.

Some companies in Europe do not want their data hosted in North America due to these concerns, the researchers said.

Meanwhile foreign companies have used the revelations as a marketing opportunity.

"There is also an increasingly distressing trend of countries, such as Australia, China, Russia, and India, passing laws that prevent their citizens' personal information from leaving the country's borders—effectively mandating that cloud computing firms build in those countries or risk losing access to their markets."

The report said several US tech firms including Apple and Salesforce have already started to build data centers abroad "to appease foreign watchdogs and privacy advocates."

While this "data nationalism" may create some jobs in the short term, Castro said that countries enacting these policies "are hurting themselves in the long term by cutting themselves off from the best technology."

New law insufficient

Castro said the passage of a reform measure last week called the USA Freedom Act is not sufficient to repair the reputation of US tech firms.

The report recommends further reforms including boosting transparency of surveillance practices, opposing government efforts to weaken encryption and strengthening its mutual legal assistance treaties with other nations.

"Over the last few years, the US government's failure to meaningfully reform its surveillance practices has taken a serious economic toll on the US tech sector and the total cost continues to grow each day," Castro said.

Castro said the USA Freedom Act, which curbs bulk data collection among its reforms, is "good legislation and a step in the right direction. We have ignored the economic impact of US ."

Explore further: US tech firms losing business over PRISM: poll

Related Stories

US tech firms losing business over PRISM: poll

July 24, 2013

Revelations about the US government's vast data collection programs have already started hurting American technology firms, according to an industry survey released this week.

US tech sector feels pain from PRISM

August 27, 2013

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.

Sen. Wyden: NSA tech spying hurts economy

October 8, 2014

Google Chairman Eric Schmidt and other Silicon Valley executives say controversial government spying programs are undercutting the Internet economy and want Congress to step up stalled reform.

Recommended for you

Where can I buy a chair like that? This app will tell you

August 23, 2016

If you think you have a knack for interior design, or just want to spruce up your own home, new technology developed by Cornell researchers may help you choose furnishings the way professionals do. And professionals may find ...

Sponge creates steam using ambient sunlight

August 22, 2016

How do you boil water? Eschewing the traditional kettle and flame, MIT engineers have invented a bubble-wrapped, sponge-like device that soaks up natural sunlight and heats water to boiling temperatures, generating steam ...

8 comments

Adjust slider to filter visible comments by rank

Display comments: newest first

cls1
5 / 5 (4) Jun 09, 2015
Snowden's revelations didn't cost any tech firms anything. The NSA's unwarranted spying imposed that cost.
PhysicsMatter
not rated yet Jun 10, 2015
US IT companies have been loosing market share for years now well before Snowden revelations. Just look at IBM. However, it was their own doing by openly giving away their technological know-how for decades for profits and more profits regardless of security issues that were raised many times. Now, neither China nor Russia need western technologies any more they are producing over 300 thousand of engineers every year and that's why US IT companies' world market share collapses. Snowden just gave them open excuse to do it administratively.
JessicaH
5 / 5 (1) Jun 10, 2015
Yes, I think The blame rests on the NSA, not Snowden.
ForFreeMinds
1 / 5 (1) Jun 10, 2015
Tech firms are to blame for not fighting in open court, the unconstitutional collection of data from them by the NSA. They partnered with the government, which allowed them to pass the costs plus some more for profit, to customers. That is crony capitalism and not free markets. The assumed this scheme would never be revealed.

The 4th amendment is clear: to obtain someone's data/papers/information, government needs probable cause a crime has been committed, and someone needs to appear before a judge swearing that they indeed have probable cause, to obtain a warrant before collecting the information.
Eikka
5 / 5 (1) Jun 10, 2015
as an excuse to enact a new wave of protectionist policies.


Excuse?

Having a foreign government access all your trade and industry secrets rather leaves you with no option but to enact protectionist policies to try stop the abuse.

The same question could be turned the other way around; what would the US do if it was revealed that China has free access to all their correspondence and much of the data?
antialias_physorg
not rated yet Jun 10, 2015
The report said foreign customers are increasingly shunning US companies, and governments around the world "are using US surveillance as an excuse to enact a new wave of protectionist policies."

Is it really an excuse when the US can mandate that the data is made accessible to them (and that the service providers may not even talk about such orders)? I'd think it's just a prudent business decision to move away from such a scenario - given that the industry theft/spying via the NSA is pretty much out inthe open. It'd be incredibly stupid to host data in the US. Might as well just hand it over to competitors there, directly.

While this "data nationalism" may create some jobs in the short term, Castro said that countries enacting these policies "are hurting themselves in the long term by cutting themselves off from the best technology."

What good is the 'best tech' if it doesn't do what you need it to do: Keep your data safe/private?
antialias_physorg
not rated yet Jun 10, 2015
Tech firms are to blame for not fighting in open court, the unconstitutional collection of data from them by the NSA

Some tried. Google tried rather publicly a while back. But there's a gag order in place.
http://www.cbsnew...program/

Such a gag order is on a par in terms of 'bizarre' with secret courts in Britain - where no one may talk about the presented evidence and defendants may not even be aware of what they are charged with DURING the trial.

Welcome to the new secret-service world.
dbsi
not rated yet Jun 10, 2015
The whole cloud concept is clouded anyway. Not from the service point of view, but from the user's. Every device and every service or app tries to seduce you in to their proprietary cloud. Even if you buy a hardisk you get cloud storage thrown at you. If you don't decline every time you risk to truly loose your data in the clouds.
Its also less about cloud computing than about data grabbing because it is not only fear about NSA and the like, it is the rising awareness about the power and missuse potential presented in your aggregated cloud data.
So the new trend is to mostly prevent cloud computing by encrypting data locally and without server side key escrow or server side key recovery. If you have too, you let the cloud have your data, but you don't let it decrypt or use it.

Please sign in to add a comment. Registration is free, and takes less than a minute. Read more

Click here to reset your password.
Sign in to get notified via email when new comments are made.