Revelations about vast US data collection programs are starting to hit US 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 US company.
A separate report this month by the Information Technology & Innovation Foundation (ITIF), a Washington think tank, said US cloud providers stand to lose US$22 billion to US$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 said.
“I don’t think that helps anyone. We do benefit from free trade and the robust competitiveness in the tech industry,” he said.
The report says that the US dominates the cloud computing market both domestically and abroad, and that US firms could lose between 10 percent 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 US National Security Agency, including PRISM, believed to scoop up massive amounts of data as part of efforts to thwart terrorism.
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 e-mail and search.
Forrester Research analyst James Staten said 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.
“Add it all up and you have a net loss for the service provider space of about US$180 billion by 2016, which would be roughly a 25 percent decline in the overall IT services market,” Staten said.