US e-surveillance norms create opportunities for others

by Sohini Bagchi    Aug 27, 2013

cloud comp

The US government’s domestic e-surveillance program, known as PRISM that was announced after Edward Snowden’s revelationscould cost the US cloud companies $22 billion to $35 billion in the next 2-3 years, according to a recent report by Information Technology & Innovation Foundation (ITIF). However, many believe this can open up newer opportunities for cloud service providers in other countries, especially in Europe and Asia, as they are set to capture a large slice of the cloud market in the coming years.

Cloud woes for the US

The global enterprise public cloud computing market is likely to reach a whopping $207 billion by 2016 as per Gartner. While the US has been a global leader in providing cloud computing services globally with a big chunk of its revenue coming from companies from non-US countries, the ITIF report indicates that the disclosures of the electronic surveillance may fundamentally alter the market dynamics, as practitioners, companies, and other stakeholders in the enterprises and SMB segment are looking to other markets. “The U.S. will eventually lose about 10-20% of foreign market to European or Asian competitors and retain its currently projected market share for the domestic market,” says Castro in the report.

Another report by the Cloud Security Alliance published in July 2013 revealed, 10% of non-US respondents polled by the company indicated that they had cancelled a project with a U.S.-based cloud computing provider, 56% said that they would be less likely to use a US-based cloud computing service, while 36% percent of the US companies indicated that they will now find it difficult to do business outside of the country. “A loss of trust in US tech firms could lead to “protectionist” measures that hurt the fast-growing cloud sector in the country,” says Daniel Castro, author of the report.

The market is currently quite upbeat in terms of cloud adoption. The market will continue to thrive, irrespective of whether customers are using cloud solutions from an US-based or a non-US based company. In facr, there is a lot more opportunity in the emerging companies where service providers are increasingly getting innovative and offer niche solutions.
-Ajay Sawant, Managing Director, AllTimeIT Solutions

Boom time for non-US nations

Of the other countries that are riding the cloud computing opportunity, France, has invested €135 million in a joint venture in cloud computing. Cloud service providers in Germany are also seeing tremendous opportunity in offering cloud services to existing and promising clients in Europe and other regions who were earlier loyal customers to the US cloud providers.

Cloud providers in Asia also see tremendous potential in the future cloud industry and believe the emerging markets will do exceptionally well in terms of offering innovative services to respond to the market and customer needs.

According to Ajay Sawant, Managing Director, AllTimeIT Solutions, “The market is currently quite upbeat in terms of cloud adoption, irrespective of whether they are using cloud solutions from an US or a non-US based company.”

As cloud computing continues to expand, one issue that received very little attention, is the geographical location of data. The ongoing NSA scandal is finally bringing to light the aspect of how critically important the physical location of digital data has become. According to Sawant, it is always risky to choose a cloud provider whose data centers are located on a distant geography also because it increases latency and so adversely affect performance. Other cultural and legal implications are also reasons companies should opt for a local cloud service provider.

Mikko Hypponen, chief research officer at internet security company F-Secure also noted in a statement: “If you are going to have a Big Brother, I’d much rather have a domestic Big Brother than a foreign Big Brother,” referring to the growing importance of local service providers.

Road ahead for the US

In the current scenario, to prevent the loss as much as possible, the US government needs to proactively declassify information about the PRISM program and allow companies to reveal more details about what information has been requested of them by the government, says Castro.

They should also have a clear approach on what information US-based and non US-based companies are disclosing to both domestic and foreign governments. For example, the trade negotiators should work to include transparency requirements in trade agreements, including the Transatlantic Trade and Investment Partnership (TTIP) that is currently being negotiated with the EU. Castro believes if the US government fails to do so, cloud computing providers of other nations – who are already gearing up – will further step into grow their own businesses, at the cost of the US cloud providers.