U.S. cloud industry stands to lose $35 billion amid PRISM fallout

U.S. cloud industry stands to lose $35 billion amid PRISM fallout

Summary: Revelations of the U.S. government's spying programs could have a massive impact on the U.S. cloud industry, which stands to lose vast sums over the next three years as a result — compounded by other countries bankrolling efforts to combat U.S. market leadership.

TOPICS: Security, Cloud
The U.S. cloud computing could take a hammering in confidence over the next few years as a result of the NSA's surveillance programs, while fostering strong international growth. (Image via CNET)

The U.S.' dominance in the cloud space may soon be challenged by rival countries, particularly those in the European Union, as the global surveillance scandal threatens to wipe up to $35 billion off the U.S. cloud slate.

A new report by non-profit group the Information Technology and Innovation Foundation claims that Europeans are attempting to nudge away from their American counterparts in a bid to distance themselves from U.S. electronic surveillance and eavesdropping. 

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PRISM fallout could cost US cloud industry billions, warns Europe's digital chief

PRISM fallout could cost US cloud industry billions, warns Europe's digital chief

US cloud service providers could miss out on business from EU firms because of anger of US government surveillance programmes, warns the EU's digital chief.

While the risk of the Patriot Act was known three years ago and confidence was already shaky in some sectors of the IT industry, now that news of the U.S. National Security Agency's PRISM program, among others, came to light, cloud providers outside the U.S. are stoking the fires once more. By 2016, the global public cloud industry will stand to be a $207 billion industry, with spending expected to rise by 100 percent in the four years from 2012.

It comes just weeks after EU Digital Agenda Commissioner Neelie Kroes warned that European businesses would "rationally" turn away from U.S. companies embroiled in the PRISM scandal, which automated the process of sharing user data with intelligence agencies.

"The United States has both the most to gain and the most to lose," writes report author Daniel Castro, citing job growth and revenue dependent on the U.S. exporting cloud computing services.

The "low end" scenario estimates assumes the U.S. loses about 10 percent of its foreign market to European or Asian competitors, or $21.5 billion over the next three years. 

However, the "high end" of $35 billion assumes a 20 percent loss to foreign markets by 2016.

The report notes at this early stage it is impossible to gauge exactly how the U.S. cloud computing market has suffered as a result of the NSA's surveillance programs. But based on surveys conducted by the Cloud Security Alliance during June and July, over the two primary months of news relating to the scandal, 56 percent of non-U.S. organizations said they would not use a U.S. provider in future. (ZDNet's Liam Tung has more on these figures). 

In concluding remarks, Castro said the U.S. government should "proactively set the record straight," and declassify information where possible and necessary.

"The economic consequences of national security decisions should be part of the debate, and this cannot happen until more details about PRISM have been revealed," the report says.

Topics: Security, Cloud

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  • Oh Dear, How Sad, Never Mind

    Maybe if the US paid more than lipservice to concepts like "freedom" and "democracy" and "rule of law", it wouldn't be in this pickle.
    • It can't be more then lipservice

      The US Federal Government and its agencies all work for/serve the international banking community and not the American citizens. In order to prveent a backlash by the American pulic its necessary to maintian the illusion that the government still serves the people and they do this via the Islamic Boogeyman and bogus threat of terrorism.

      If this were anything other then lipservice it would require the elected officials to get out of the pockets of global elite bankers and thats just not going to happen any time soon.
      • People get the government they deserve

        Not like the people aren't getting what they asked for...
        • Not

          It's only an illusion that the American people get what they vote for. That is becoming more common knowledge everyday now.

          Whar you are correct about is the fact that if Americans don't stand up against what they disagree with then they deserve what they get.

          It doesn't matter if Bush, Clinton, or Obama or any other puppet is seemingly in charge. What matters it is whether we can develope the ability to cut through all of the disinformation and discern the true agenda that runs through and behind all administrations. Then at that point each individual will have to decide whether they have the will to stand up and put an end to it. Thank you Mr Snowden.
    • just like companies left California to less onerous states

      They will move to other countries with a click of the mouse. First everything is built overseas, now the government is driving IT overseas.
      Lots of nerve spying on foreign countries and then asking them to please return our whistle blower.
  • Alleged

    "...NSA's alleged surveillance programs..."

    Yeah, sure.
    Susan Antony
  • "European or Asian competitors"

    besides SAP are there any European competitors? SAP, being a Germany company, is in the same boat


    as for Asian competitors, I don't see how anyone concerned about government surveillance would even begin to consider Asia unless they have to serve Asian markets
    • Far from it

      German intelligence might have used NSA software but unlike in the US, the German attorney general is investigating the matter. The whole affair might end up both in front of the constitutional court as well as the criminal court system, depending on what the AG finds.
  • From all of us who have been saying the Cloud can't be secure...

    You're welcome.
  • The Most Lawless Goverment in US History

    We are dealing with the most lawless government in the history of the United States. Our “fearless” leaders no longer follow the Amendment process and do not even see a necessity for public discourse prior to trampling the Bill of rights!

    "Our Government is the potent, the omnipresent teacher. For good or ill, it teaches the whole people by example. Crime is contagious. If the Government becomes a lawbreaker, it breeds contempt for the law; it invites every man to become a law unto himself." Supreme Court Justice Louis D. Brandeis

    The right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated, and no Warrants shall issue, but upon probable cause, supported by Oath or affirmation, and particularly describing the place to be searched, and the persons or things to be seized. -

    Like many other areas of American law, the Fourth Amendment finds its roots in English legal doctrine. Sir Edward Coke, in Semayne's case (1604), famously stated: "The house of every one is to him as his castle and fortress, as well for his defence against injury and violence as for his repose."[2] Semayne's Case acknowledged that the King did not have unbridled authority to intrude on his subjects' dwellings but recognized that government agents were permitted to conduct searches and seizures under certain conditions when their purpose was lawful and a warrant had been obtained.[3]

    The 1760s saw a growth in the intensity of litigation against state officers, who, using general warrants, conducted raids in search of materials relating to John Wilkes' publications attacking both government policies and the King himself …
    • The weakness of the house as a castle metaphor

      When Sir Edward Coke made his statement, the scope of effect for actions taking place within the house was contained by the house itself. Now one may sit in one's house and communicate with other continents, partaking in activities innocuous or nefarious, including trafficking in weapons, drugs, and terrorism.

      Once, everyone was bound in a heavy web of surveillance - the village neighbors, who knew not only you but your family going back generations. Moving to the city offered relatively less surveillance, but when we expand our sphere of activity, some other mechanisms must be invented to provide the security functions once supplied by nosy neighbors.
  • considering the government

    can grab all data going through the US (which is most of the data in the world) anyway, it doesn't matter that much where your cloud service is hosted anyway.
    • where it's hosted IS important

      Where the data is hosted IS important, because they are somewhat hampered by their own laws if it resides in their house, but if it resides in someone else's house (another country) they can easily break in and ransack the house from inside, looking for what they want and not get caught, or deny penetration or involvement. All in the name of keeping the Homeland safe, of course.
  • Corporate issues

    The government is responsive to corporations more than individuals. Corporations and the 1% are synonymous and if they want or benefit from accessing the information gathered through NRA resources the there is no stopping it. It's their capital being manipulated through corporations. Gates as major stockholder of MSFT and member of the 1% is in a uniquely independent position as the only thing he has to fear is a governmental takeover of MSFT in the national interest. This would be a frontal attack by the other members of the 1%. This is the new era and our only influence is through consumption and not the vote. Apple is controlled by the 1%, by the way, so they get special treatment from the media and government agencies. Now that major media outlets are being bought outright by the 1% whistle blowers will have no outlets in the USA where the face prosecution or worse forms of intimidation.
    • You have to remember

      The United States of America legally IS a corporation and ran as such. It's one reason they are able to get away with some of the things they are doing (subverting the constitution and our rights). There is no oversight, no real accountability, they don't even follow their own laws unless it is to their benefit. The left/right paradigm is a ruse on the low info voters to keep them divided all while they rob us blind and sign us and our children on to debt we never agreed to. Votes mean squat, these people are picked beforehand by people with no right to do so. Obama has no legal right to even be president as he is not a natural born citizen and held foreign citizenship, yet there he sits. His first executive order was to hide all his prior info coincidentally. Only when the masses finally can come together will it end. It will probably never happen sadly. There is a way out though, ex patriation. Fun Fact: The U.S.A. is on it's fourth bankruptcy currently.
    • Correct

      Government of, by, and for the corporations.
  • You are all missing the point

    The EU will ride this pony until it drops dead. Reason: they are still hurting from losing the commercialization of computing to first the U.S. and later Asia. Since then they have been trying everything, from throwing scads of government money to "antitrust" proceedings to get back in the game. Well thank you, NSA, you gave them a huge opening for a late race pass.

    But it will be to no avail, unless they want to take on China. Do they???

    And everyone spies on everyone - besides, why spend money on the NSA. Just have a bunch of high school kids spend all day on Facebook and Twitter and report back. For being so bent out of shape on privacy, we all seem to really like telling it all in public.
  • It is a simple law of business

    You only control what is in-house. Using cloud services from national vendors opens your company up to snooping, spying and other nefarious operations by our wonderful government.

    And as we seen to the IRS scandals, apparently those companies or individuals with "favorite status" have insider access to government procured data.
  • Europe pot calling the US kettle black

    The European wannabe competitors of US cloud services and their European overlords are hypocrites because these European governments, such as Great Britain spying on their citizens every bit as much. The spying business is international and the various participants therein freely exchange information. The infrastructure is being set up worldwide for the coming New World Order. After the collapse of the dollar and the euro, a new cashless money system will be created by the international banking community. Every financial transaction of every person will be tracked. This requires a tremendous amount of computing and storage resources and ubiquitous network connections everywhere.
    • pot and kettle

      The pot can call the kettle black when the pot is all rusted with age and bankrupting debts so crushingly heavy that their grandchildren are not even going to see the light at the end of the debt tunnel.