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How the NSA leaks could affect the US cloud computing industry

Experts say that leaks about the NSA surveillance program could hurt US cloud companies as their customers worry about data security.

By Contributor / August 26, 2013

A projection of text on the face of a woman in Berlin, June 12, 2013. NSA leaks have fueled conversations about the security of US-based cloud computing companies.

Pawel Kopczynski/ Reuters/ File

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News of the National Security Agency's data collection and surveillance programs made public ongoing privacy debates in the Foreign Intelligence Surveillance Court, inciting a backlash against the US government both domestically and internationally. 

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Concerns about who has access to troves of online data extends from foreign negotiations to business deals: If the FISA court can issue a "national security letter" to gain access to US-based Internet companies’ servers, any foreign company’s data stored on these servers could be accessed by the US government.

A recent report from the Information Technology and Innovation Foundation estimates that the United States’ multibillion-dollar US cloud computing industry stands to lose anywhere from $22 to $35 billion over the next three years because of the NSA revelations.

“If European cloud customers cannot trust the United States government, then maybe they won’t trust US cloud providers either,” said European Commissioner for Digital Affairs Neelie Kroes in an interview with the Guardian in July. “If I am right, there are multibillion-euro consequences for American companies. If I were an American cloud provider, I would be quite frustrated with my government right now."

Industry shifts since the NSA leaks in early June support Mr. Kroes’ argument. Amazon Web Services, widely acknowledged as the global market leader in cloud storage, cut some of its prices by 80 percent in July to remain competitive. The writing on the walls seems clear: The NSA leaks will hurt US cloud companies. But to peg an industry shift to June 2013 would overlook a larger trend that has been taking place in the industry since 2001.

“Enterprises were worried about government snooping well before the NSA leaks,” writes Camille Mendler, principle analyst with the Informa group in an e-mail to the Monitor. “The US government gets most [of the] attention because of the implied powers of the Patriot Act, let alone issues around NSA [and] Prism.”

The concept of cloud computing, or storing massive amounts of data in computers, dates back to the 1950s, though the feasibility of maintaining servers with vast amounts of information did not really take off until the early 2000s with the spread of the Internet. In 2006, Amazon Web Services was one of the first companies to offer large amounts of cloud storage to clients. Within several years, the industry had taken off. Data was increasingly stored in electronic clouds, rather than company hard drives.  

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