Snowden’s fallout: U.S. snooping is damaging its cloud-computing sector

Revelations of U.S. snooping are damaging the U.S. cloud-computing sector

Vincent Yu (Associated Press)

Vincent Yu (Associated Press)

Edward Snowden, American whistleblower, spent his Fourth of July as he had the previous 11 days: stuck in the travel zone of Moscow’s Sheremetyevo airport, hoping for asylum. But if Snowden—who leaked a huge trove of data about a top-secret U.S. surveillance program known as PRISM in June—was in limbo on Independence Day, the world around him was not. Following the revelations that the U.S. National Security Agency had secured all-but-unfettered access to user data held by the largest U.S. tech companies, including Microsoft, Google and Yahoo, politicians and businesses around the world were struggling to figure out what exactly this news meant for them.

Neelie Kroes, the Dutch vice-president of the European Commission, thinks the fallout could be considerable. Addressing a July 4 summit on cloud computing in Tallinn, Estonia, she wondered aloud after the meeting whether Snowden’s knowledge might not have a chilling effect on the entire American cloud-computing industry.

U.S. government data requests received by Facebook in Q3/Q4 of 2012

The largest cloud providers, including Amazon and Microsoft’s Azure, are based in the U.S. But if foreign consumers, and especially businesses, believe data held with those companies is vulnerable to snooping, Kroes thinks they could quickly lose their edge in an industry estimated by research company Gartner Inc. to be worth more than $135 billion a year. “If European cloud customers cannot trust the United States government or their assurances, then maybe they won’t trust U.S. cloud providers either,” she said. “That is my guess. And if I am right, then there could be multi-billion-euro consequences for American companies.”

Microsoft requests in Q3/Q4 of 2012

Kroes isn’t the only one who thinks so. Michael Hayden, a former NSA director, told Bloomberg Snowden’s leaks were “bound to be bad news” for American companies operating abroad. Europeans are already looking to capitalize on the jingoism unleashed by the PRISM news, stepping up efforts like a “Made in Germany” branding campaign for cloud-computing technologies, and France’s “Sovereign Cloud” plan, which includes a $200-million investment in domestic cloud providers.

Kroes sees one of two things happening. Either the U.S. will agree to leave European data alone, or U.S. companies will start to lose out in the European cloud market. “Why,” she asked, “would you pay someone else to hold your commercial or other secrets if you suspect or know they are being shared against your wishes?”