US cloud providers to lose clients over surveillance fears
If American cloud service providers lost 20 per cent of their overseas business due to the National Security Agency's electronic surveillance revelations but retained their share of the domestic market, they would lose $US35 billion by 2015, according to US think tank the Information Technology and Innovation Foundation.
In June, former security analyst Edward Snowden disclosed the agency was collecting telephone records of millions of US citizens. It was later revealed internet and technology companies had been collaborating with the agency on related programs.
The global Cloud Security Alliance became aware of the antipathy to hosting data in the US by surveying 456 organisations around the world. Of the 207 respondents from outside the US, 56 per cent were less likely to use US-based cloud providers after the revelations and 10 per cent had cancelled plans to use American services. About a third said the revelations would not affect their provider choice.
The foundation said non-US cloud services were already reporting big increases in business. Switzerland's largest hosting company, Artmotion, reported a 45 per cent increase in revenue in the month following Mr Snowden's exposure of the Prism surveillance program.
The shift could be greater if foreign governments put up trade barriers, the foundation suggests. "Already the German data protection authorities have called for suspending all data transfers to US companies under the US-EU Safe Harbor program because of Prism," it said.
A similar trend is evident in Australia, says Matt Healy, national executive, regulatory and government at Macquarie Telecom and chairman of cloud industry body, OzHub.
Full story: theage.com.au/it-pro
Frequently Asked Questions about this Article…
The fears followed disclosures by former security analyst Edward Snowden that the US National Security Agency was collecting telephone records and collaborating with internet and technology companies on surveillance programs (including the Prism program). Those revelations made many customers wary of hosting data with US-based cloud providers.
A US think tank, the Information Technology and Innovation Foundation, estimated US cloud providers could lose up to US$35 billion (about A$38.7 billion) over the next three years if they lost 20% of their overseas business while keeping their domestic share.
The Cloud Security Alliance surveyed 456 organisations and found that among 207 respondents from outside the US, 56% were less likely to use US-based cloud providers after the revelations and 10% had cancelled plans to use American services; about one-third said the revelations would not affect their provider choice.
Yes. The article notes non-US cloud services were reporting big increases in business after the revelations. For example, Swiss hosting company Artmotion reported a 45% increase in revenue in the month following Snowden's exposure of the Prism program.
The think tank suggested the shift could be greater if foreign governments impose trade barriers. The article cites German data protection authorities calling for suspending data transfers to US companies under the US‑EU Safe Harbor program because of Prism.
Matt Healy of Macquarie Telecom and chairman of cloud industry body OzHub said a similar trend was evident in Australia, indicating Australian cloud providers and investors may also feel the effects of customers avoiding US-based cloud services.
Based on the article, investors should note the risk of reduced overseas revenue for US cloud providers, potential market share gains for non‑US providers, and increased regulatory or trade risks. These factors could influence revenue growth and competitive dynamics in the cloud industry.
The article cites an estimate of possible losses over the next three years, with the US$35 billion figure projected by 2015. Investors should monitor developments in data‑privacy policy, customer migration to non‑US providers, and industry revenue trends during that period.
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