The NSA's spying has in fact hurt U.S. cloud providers

Although worrying, the loss of business is not as great as analysts originally feared

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The NSA surveillance caused a global steel manufacturer based in Britain to demand that its data not cross into the United States, said Mark J. Barrenechea, CEO of OpenText, Canada's largest software company CEO, in a New York Times story. In the same article, Matthias Kunisch, managing director at Germany's Forcont Business Technology, said he took his business to Deutsche Telekom instead of a U.S. provider because of the NSA controversy.

There are other examples as well, notes Daniel Castro, the author of last year's ITIF report that raised the alarm., he notes, lost a contract with a major German insurance company because of the NSA concerns, and Boeing lost a $4.5 billion fighter jet contract with Brazil because of anger over the NSA's spying on that nation's leadership.

Boeing obviously isn't part of the IT industry, but when major companies in any industry lose significant business because of fallout from a government program, they're quick to yell. It's also likely that President Barack Obama's recent call to rein in the NSA is at least partly the result of complaints from companies like Boeing, not to mention Microsoft, Facebook, and Google, says Forrester's Staten.

With spies everywhere, companies turn inward and invest more in security
The Snowden revelations have put the NSA in the spotlight, but it's naïve to think that other governments don't have similar programs, says Gartner's Anderson. In fact, Snowden's revelations show that Britain's GCHQ is an active partner with the NSA in such spying in Britain and other countries. In addition, U.S. government officials have been warning about Chinese government spying for years.

Corporations know that other governments spy on at least their own providers, Anderson says, which is why he doesn't expect a massive hemorrhage of cloud business from the United States.

That's why large businesses are doing more than shopping for cloud providers less likely to be major spying targets. They're keeping data stores in their own facilities and increasing their use of encryption. Companies with consumer-facing business have ramped up security precautions; Google, for example, spent a good deal of time and money encrypting email, search queries, and other information flowing among its data centers worldwide.

Even in the spying fears are overblown, the money spent on security may be well spent, given the huge number of data breaches we've seen recently. Intruders are intruders, whether NSA spies or hackers from Eastern Europe.

This an issue to watch closely. Even if you don't care all that much about what the NSA is doing, the business lost by U.S. companies will quickly morph into major job losses for the armies of technologists they support.

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