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NSA revelations helping US tech industry


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.


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