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Edward Snowden‘s unprecedented exposure of U.S. technology companies’ close collaboration with national intelligence agencies, widely expected to damage the industry’s financial performance abroad, may actually end up helping.
Despite emphatic predictions of waning business prospects, some of the big Internet companies that the former National Security Agency contractor showed to be closely involved in gathering data on people overseas – such as Google Inc. and Facebook Inc. – say privately that they have felt little if any impact on their businesses. Insiders at companies that offer remote computing services known as cloud computing, including Amazon and Microsoft Corp, also say they are seeing no fallout.
Meanwhile, smaller U.S. companies offering encryption and related security services are seeing a jump in business overseas, along with an uptick in sales domestically as individuals and companies work harder to protect secrets.
last month, six technology trade groups wrote to the White House to urge reforms in the spy programs, citing what it called a “study” predicting a $35 billion cumulative shortfall by 2016 in the vital economic sector. That number, it turns out, was extrapolated from a security trade group’s survey of 207 non-U.S. members – and the group, the Cloud Security Alliance, had explicitly cautioned that its members weren’t representative of the entire industry.
The trade groups aren’t the only ones issuing dismal, and headline-grabbing, forecasts.
Forrester Research analyst James Staten wrote of the $35 billion figure: “We think this estimate is too low and could be as high as $180 billion, or a 25 percent hit to overall IT service provider revenues.”
Google employees told Reuters that the company has seen no significant impact on its business, and a person briefed on Microsoft’s business in Europe likewise said that company has had no issues. At Amazon, which was not named in Snowden’s documents but is seen as a likely victim because it is a top provider of cloud computing services, a spokeswoman said global demand “has never been greater.”
There are multiple theories for why the business impact of the Snowden leaks has been so minimal.
One is that cloud customers have few good alternatives, since U.S. companies have most of the market and switching costs money.
Perhaps more convincing, Amazon, Microsoft and some others offer data centers in Europe with encryption that prevents significant hurdles to snooping by anyone including the service providers themselves and the U.S. agencies. Encryption, however, comes with drawbacks, making using the cloud more cumbersome
Another possibility is that tech-buying companies elsewhere believe that their own governments have scanning procedures that are every bit as invasive as the American programs. Some think it’s just a matter of time, however, before U.S. industry suffers significantly.
As for the upside, so far only a minority of people and businesses are tackling encryption on their own or moving to privacy-protecting Web browsers, but encryption is expected to get easier with more new entrants. Snowden himself said that strong encryption, applied correctly, was still reliable, even though the NSA has cracked or circumvented most of the ordinary, built-in security around Web email and financial transactions.
Some early adopters of encryption have senior jobs inside companies, and they could bring their habits to the office and eventually change the technology habits of the whole workplace, in the same way that executive fondness for iPhones and iPads prompted more companies to allow them access to corporate networks.
“Clients are now inquiring how they can protect their data overseas, what kinds of access the states might have and what controls or constraints they could put in with residency or encryption,” said Gartner researcher Lawrence Pingree, formerly chief security architect at PeopleSoft, later bought by Oracle.
Richard Stiennon, a security industry analyst and author, predicted that security spending will rise sharply.
A week ago, Google said it had intensified encryption of internal data flows after learning about NSA practices from Snowden’s files, and consultants are urging other big businesses to do the same.
Stiennon said that after more companies encrypt, the NSA and other agencies will spend more to break through, accelerating a lucrative cycle.
“They will start focusing on the encrypted data, because that’s where all the good stuff is,” Stiennon said.
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Source: Associated Press
Copyright 2013 Thomson Reuters.