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Report: Calculating PRISM's Carnage

It's been obvious since the PRISM revelations came to light earlier this summer that they could hurt the momentum of public cloud services.

PRISM is the reported, wide-ranging U.S. National Security Agency (NSA) data collection program revealed by Edward Snowden that allegedly operates with the cooperation of major technology companies, including Microsoft, Google, Yahoo and others. Whether that cooperation is voluntary and broad or forced and narrow is a matter of heated debate. 

This month, a new study by an industry group tries to calculate what the damage will be to the major U.S. companies that the NSA is supposed to be getting PRISM data from.

The question is posed by the report's title, "How Much Will PRISM Cost the U.S. Cloud Computing Industry?" Daniel Castro wrote the report for the International Technology & Innovation Foundation, a Washington, D.C.-based lobbying organization, which includes academics, IT lobbyists and attorneys, as well as executives from tech companies, such as Microsoft, Cisco and HP.

Castro connects several dots related to European sentiment about increasing their cloud infrastructure so as not to be dependent on the United States; Europeans' growing investments in cloud infrastructure; and European business and government concerns about the privacy of their data stored in U.S.-based companies' servers.

According to the report:

"While much of [the] projected growth was until recently up for grabs by U.S. companies, the disclosures of the NSA's electronic surveillance may fundamentally alter the market dynamics."

"On the low end, U.S. cloud computing providers might lose $21.5 billion over the next three years. This estimate assumes the U.S. eventually loses about 10 percent of foreign market to European or Asian competitors and retains its currently projected market share for the domestic market.

"On the high end, U.S. cloud computing providers might lose $35.0 billion by 2016. This assumes the U.S. eventually loses 20 percent of the foreign market to competitors and retains its current domestic market share."

To be sure, lobbying group studies almost always overestimate the costs to industry of government actions. Nonetheless, the potential loss of $21 billion to $35 billion to U.S. businesses of the PRISM efforts are an important new data point in the discussion.

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Posted by Scott Bekker on August 19, 2013 at 12:31 PM


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