Report: U.S. cloud industry stands to lose $35B in three years due to NSA snooping

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There’s been lots of grumbling about how the NSA spy program might negatively impact U.S. cloud provider business in Europe and elsewhere. Now, a researcher has tried to quantify that impact, concluding that U.S. cloud providers stand to lose as much as $35 billion over the next three years.

It’s a real back-of-the-napkin calculation but not all that unreasonable. Daniel Castro of the Information Technology and Innovation Foundation based the calculation in part on a member survey done in June and July by the Cloud Security Alliance asking respondents about their reaction to the leaks. Among those outside the U.S., 10 percent said that they’d cancelled a project with a U.S.-based cloud provider. Fifty-six percent said they’d be less likely to use a U.S. based cloud computing service. Among U.S. residents, 36 percent said it had become more difficult to do business outside the U.S. since the revelation of the NSA spying.

Based on that survey, Castro concludes that U.S. cloud service providers stand to lose between 10 percent and 20 percent of the overseas market. Using stats from Gartner on the expected growth of the non-U.S. market, he figures U.S. cloud providers could lose $22 billion to $35 billion over the next three years.

That’s a lot, to put it mildly.

There’s some evidence that the flight way from U.S. cloud providers is already happening. Castro wrote that Artmotion, a Swiss hosting company, reported a 45 percent increase in revenue in the month after the details of the spy program came to light. It’s not clear if the company attributes that boost to local companies fleeing U.S. providers.

Sadly, there aren’t great options that might help U.S. cloud providers get over this hurdle. It wouldn’t be a popular theme, but they could point out that other countries may be doing the same kind of snooping. The report points to a recent IDC study that concluded that “the Patriot Act is nothing special” and that data stored in the U.S. is actually generally better protected than most European countries. Castro also said that German intelligence officials are authorized to monitor telecommunications without a court order.

But like I said, that argument isn’t likely to over all that well.

The recommendations that Castro suggests include moves by the U.S. government to offer transparency into the spy program. I wouldn’t hold my breath for that to happen. Even if that were to happen, I imagine it would take years, during which U.S. cloud providers could hemorrhage overseas users.

Read more of Nancy Gohring's "To the Cloud" blog and follow the latest IT news at ITworld. Follow Nancy on Twitter at @ngohring and on Google+. For the latest IT news, analysis and how-tos, follow ITworld on Twitter and Facebook.

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