The Information Technology & Innovation Foundation has released a report where they say that the recent NSA revelations are going to cost American companies that provide cloud computing and encryption services quite a lot of money, since many international businesses may be reluctant to give their business to US companies that can be compelled to provide the government with backdoor access to all their information.
Neelie Kroes, European Commissioner for Digital Affairs, stated the problem quite succinctly, “If European cloud customers cannot trust the United States government, then maybe they won’t trust U.S. cloud providers either. If I am right, there are multibillion-euro consequences for American companies. If I were an American cloud provider, I would be quite frustrated with my government right now.”
Rival countries have noted this opportunity and will try to exploit it. One tactic they used before the PRISM disclosures was to stoke fear and uncertainty about the USA PATROIT Act to argue that European businesses should store data locally to protect domestic data from the U.S. government.
Just how much do U.S. cloud computing providers stand to lose from PRISM? At this stage it is unclear how much damage will be done, in part because it is still not certain how the U.S. government will respond. But it is possible to make some reasonable estimates about the potential impact.
On the low end, U.S. cloud computing providers might lose $21.5 billion over the next three years. This estimate assumes the U.S. eventually loses about 10 percent of foreign market to European or Asian competitors and retains its currently projected market share for the domestic market.
On the high end, U.S. cloud computing providers might lose $35.0 billion by 2016.
What is interesting is that Silicon Valley has generally been very supportive of president Obama and he has been eager to return the favor. He recent overturned a ruling by the US International Trade Commission (something that is extremely rare) that adversely affected Apple. Why?
President Obama enjoys a close relationship with Apple and was good friends with its late CEO/co-founder Steven P. Jobs. Mr. Jobs, not long before his death in Oct. 2011, personally helped President Obama overhaul his campagin strategy, pushing staffers to make greater use of social media channels like Facebook.com, Inc. (FB), Twitter, Google YouTube, and Tumblr.
Apple gave $308,000 USD to President Obama versus $28,000 to Mitt Romney, the Republican challenger.
It will be interesting to see if American tech companies are hurt enough to try and get the government to back off on its aggressive spying.