Snooping saga: NSA spying costs US tech firms

Microsoft has lost customers, including the government of Brazil. IBM is spending more than a billion dollars to build data centres overseas to reassure foreign customers that their information is safe from prying eyes in the United States government. And, tech companies abroad, from Europe to South America, say they are gaining customers that are shunning United States providers, suspicious because of the revelations by Edward J Snowden that tied these providers to the National Security Agency's vast surveillance programme.

Even as Washington grapples with the diplomatic and political fallout of Snowden's leaks, the more urgent issue, companies and analysts say, is economic. Technology executives, including Mark Zuckerberg of Facebook, raised the issue when they went to the White House on Friday for a meeting with President Obama.

It is impossible to see now the full economic ramifications of the spying disclosures - in part because most companies are locked in multiyear contracts - but the pieces are beginning to add up as businesses question the trustworthiness of American technology products. The confirmation hearing last week for the new NSA chief, the video appearance of Snowden at a technology conference in Texas and the drip of new details about government spying have kept attention focused on an issue that many tech executives hoped would go away.

Despite the tech companies' assertions that they provide information on their customers only when required under law - and not knowingly through a back door - the perception that they enabled the spying program has lingered.

"It's clear to every single tech company that this is affecting their bottom line," said Daniel Castro, a senior analyst at the Information Technology and Innovation Foundation, who predicted that the United States cloud computing industry could lose $35 billion by 2016.

Forrester Research, a technology research firm, said the losses could be as high as $180 billion, or 25 per cent of industry revenue, based on the size of the cloud computing, web hosting and outsourcing markets and the worst case for damages.

The business effect of the disclosures about the NSA is felt most in the daily conversations between tech companies with products to pitch and their wary customers. The topic of surveillance, which rarely came up before, is now "the new normal" in these conversations, as one tech company executive described it.

"We're hearing from customers, especially global enterprise customers, that they care more than ever about where their content is stored and how it is used and secured," said John E Frank, deputy general counsel at Microsoft, which has been publicising that it allows customers to store their data in Microsoft data centres in certain countries.

At the same time, Castro said, companies say they believe the federal government is only making a bad situation worse.

"Most of the companies in this space are very frustrated because there hasn't been any kind of response that's made it so they can go back to their customers and say, 'See, this is what's different now, you can trust us again,' " he said.

Excerpt from:
Snooping saga: NSA spying costs US tech firms