Sep 12 2013

Has the Snowden Saga Dampened the Cloud's Future in the U.S.?

American cloud providers stand to lose more than $20 billion as foreign customers respond to the NSA-PRISM scandal.

On Aug. 5, the Information Technology and Innovation Foundation, a think tank located in Washington, D.C., released a report titled How Much Will PRISM Cost the U.S. Cloud Computing Industry?

The report, which drew from a number of recent surveys and findings, says that over the next three years, U.S. cloud providers stand to lose between $21.5 billion and $35 billion to non-U.S. providers taking advantage of the perception of U.S. cloud provider complicity in the U.S. government’s clandestine PRISM surveillance program, revealed by Edward Snowden’s NSA leaks.

This would be a financial blow to the burgeoning U.S. cloud industry at a most inopportune time. Prior to the PRISM leaks, U.S. companies controlled 85 percent of the $75.9 billion non-U.S. cloud market. Over the next three years, the U.S. share of that market is projected to shrink between 20 and 30 percent, despite projected market growth of nearly 33 percent over the same period.

While there are others factors at play, such as projected growth in the European cloud industry, a growing movement of non-U.S. enterprises and governments are distancing themselves from potential U.S. government scrutiny of data stored in U.S. clouds.

In the ITIF report, Neelie Kroes, the European commissioner for digital affairs, identifies the issue succinctly: “If European cloud customers cannot trust the United States government, then maybe they won’t trust U.S. cloud providers either.” Snowden’s PRISM leaks are fundamentally altering the cloud market dynamics in the near term.

While the U.S. government and cloud providers are under the microscope at the moment, the ITIF report notes that most developed countries have mutual legal assistance treaties (similar in effect to the USA PATRIOT Act), which allow governments to access third-party data, whether or not the data is stored domestically. In the future, the potential for data privacy abuses will certainly exist. But here and now, foreign cloud providers are making the most of this scandal to capture a bigger piece of the cloud pie.

In fact, one Canadian IT leader has already rang the bell, calling for Canadian technologists to invest in Canadian-owned cloud infrastructures to better leverage the opportunity for non-U.S. cloud operators.