Katie Benner: Microsoft and Google in a post-Snowden world

The privacy debate is getting louder in techlandia as it becomes clear that the National Security Agency (NSA)'s digital snooping, along with other government surveillance programmes, could upend the US tech industry's global dominance.

Two recent developments drive this home. The first is a high-profile court case involving the US government and Microsoft. The second is China's decision to rip foreign technology out of its most important institutions - state-owned companies, banks and government agencies - and shift to domestic suppliers.

Before delving into those developments, it's worth noting that both the Microsoft case and the China decision are part of a bigger narrative that started taking shape last summer after Edward Snowden leaked information about the US government's sweeping surveillance programmes.

His documents revealed myriad NSA spy programmes that hoovered up information on foreign suspects as well as US citizens. The agency had also pressured telecom companies like Verizon and internet giants like Google to feed customer data into the government's vast surveillance operation. As the Snowden revelations showed, the US government was also actively exploiting corporate security flaws to take whatever it wanted from those companies.

In the wake of all of that, tech firms immediately tried to distance themselves from the NSA, even as the Snowden revelations tarnished their reputations with corporate clients, consumers and governments worldwide. Companies warned that fallout from the Snowden revelations would hurt their future earnings and, anecdotally, it seemed that global customers started to look for alternatives to US tech suppliers.

Bloomberg reported that China intends to replace hardware and software made by Microsoft, Cisco, IBM, Intel and Hewlett-Packard with home-grown operating systems and networking equipment by 2020. For those trying to calculate the impact of all of this, it's good to keep in mind that it's costly and hard to rip out and replace an entire IT stack that you've come to depend on over a long period of time. Simply doing it invites disruption and glitches and all of the things we've come to hate when technological processes go awry. But it's the sort of thing that a semi-state run economy like China's can implement, even if it stymies production.

Nevertheless, the move reflects a harsh reality for US tech companies: they earned leadership positions worldwide by making the best hardware and software, and now global politics could obliterate the advantages created by superior innovation and high-quality products.

Most overseas corporations won't up and abandon US tech companies since they can't afford to rebuild their businesses from the ground up. But as Bloomberg has reported, potential clients with new projects overseas will likely look for alternatives to the US technology suppliers. Tech projects in emerging markets are growing at a faster rate than those in developed markets, where infrastructure is already entrenched. Brazil has already said that it can build a $185-million submarine data cable without US help.

Revelations about parts of the NSA surveillance programme could cause the US cloud computing industry to lose $35 billion of business by 2016 (about 20 per cent of the potential revenues from foreign markets), according to a report from the Information Technology & Innovation Foundation.

Forrester Research thinks that NSA spying could cost the US tech industry as much as $180 billion by 2016 because surveillance worries will affect non-cloud companies too - and domestic customers will want to bypass vendors perceived to be feeding data to the government.

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Katie Benner: Microsoft and Google in a post-Snowden world