NSA revelations may cost US companies between $22 and $35 billion

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.


  1. wtf says

    Individuals may still trust the cloud due to ignorance, or convenience, but I do think the cloud economy will be impacted.

    Consider how many companies now have their services hosted at Amazon, Google, RackSpace’s cloud environments, or how many companies rely on services (accounting, legal, artwork, engineering, …) hosted at those sites.

    What stops the NSA from demanding Amazon, Google, RackSpace, etc., give them access to every packet flowing in and out of their cloud computing warehouses?

    If I was CEO of any company I would be asking my employees to plan to move us off the cloud as much as we can as quickly as we can.

  2. Lassi Hippeläinen says

    One possible party to benefit out of this would be WikiLeaks/OpenLeaks. They have been practising the art of secure distributed storage for some time, but only for their own purposes. They have the skill, but I don’t know if they have the will to run a commercial service.

  3. Chiroptera says

    Ugh. I don’t like framing this in this way. In my opinion, one would be more correct to say that the lack of constitutional safeguards and proper oversight over the NSA may be costing US businesses.

  4. sailor1031 says

    Not to worry. NSA is planning to move their data to the cloud and that’s more data than all those corporate pikers put together. Those cloud providers will probably have to get more storage. Not to worry, NSA will sell off their unneeded hardware cheap……..

    On a realistic note, only an idiot would put their critical data in the cloud where it can be viewed, intercepted, copied or destroyed by any determined and technically competent enemy. I can’t wait for the first revelation to be announced that NSA cloud data has been hacked by the russians, iranians and the chinese…..

  5. says

    Once you had your data over to a third-party, you lose all right to call it private. That has been US case law for centuries.

    The cloud has always seemed like an extremely dangerous idea to me.

  6. sailor1031 says

    I should have added that your cloud data can also be destroyed by any tecnically incompetent moron…..which is scarier because there are more of them!

  7. steve84 says

    This may be the one and only thing that could sway politicians. After all the only thing they really care about is money and the backing of their corporate masters.

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