[governance] FW: [Ottawadissenters] Snowden and US tech companies

Fri Mar 21 13:33:04 EDT 2014

Fascinating. It is only in the area of Internet Governance that there seems
to be an unquestioned trust in the actions and motivations of relevant
"stakeholders" and particularly the USG and the major US Internet
corporations. I wonder why, and particularly for Civil Society who in other
spheres is rather more critical and skeptical?

M

From: Ottawadissenters at yahoogroups.com
[mailto:Ottawadissenters at yahoogroups.com] On Behalf Of Arthur Cordell
Sent: Friday, March 21, 2014 10:20 AM
To: Ottawadissenters at yahoogroups.com; futurework at vancouvercommunity.net
Subject: [Ottawadissenters] Snowden and US tech companies

Revelations of N.S.A. Spying Cost U.S. Tech Companies

*	by Claire Cain Miller NYTimes
*	March 21, 2014 

. 

SAN FRANCISCO - Microsoft has lost customers, including the government of
Brazil.

IBM is spending more than a billion dollars to build data centers overseas
to reassure foreign customers that their information is safe from prying
eyes in the United States government.

And tech companies abroad, from Europe to South America, say they are
gaining customers that are shunning United States providers, suspicious
because of the revelations by Edward J. Snowden that tied these providers to
the
<http://topics.nytimes.com/top/reference/timestopics/organizations/n/nationa
l_security_agency/index.html?inline=nyt-org> National Security Agency's vast
surveillance program. 

Even as Washington grapples with the diplomatic and political fallout of Mr.
Snowden's leaks, the more urgent issue, companies and analysts say, is
economic. Tech executives, including Eric E. Schmidt of Google and Mark
Zuckerberg of Facebook, are expected to raise the issue when they return to
the White House on Friday for a meeting with President Obama. 

It is impossible to see now the full economic ramifications of the spying
disclosures- in part because most companies are locked in multiyear
contracts - but the pieces are beginning to add up as businesses question
the trustworthiness of American technology products. 

Meanwhile, the
<http://www.nytimes.com/2014/03/11/world/admiral-set-to-face-confirmation-to
-lead-nsa.html> confirmation hearing last week for the new N.S.A. chief, the
<http://bits.blogs.nytimes.com/2014/03/10/at-sxsw-snowden-speaks-about-n-s-a
-spying/> video appearance of Mr. Snowden at a technology conference in
Texas and the drip of new details about government spying have kept
attention focused on an issue that many tech executives have hoped would go
away.

Despite the tech companies' assertions that they provide information on
their customers only when required under law - and not knowingly through a
back door - the perception that they enabled the spying program has
lingered.

"It's clear to every single tech company that this is affecting their bottom
line," said Daniel Castro, a senior analyst at the Information Technology
and Innovation Foundation, who predicted that the United States cloud
computing industry could
<http://www.itif.org/publications/how-much-will-prism-cost-us-cloud-computin
g-industry> lose $35 billion by 2016.

Forrester Research, a technology research firm, said the losses could be
<http://blogs.forrester.com/james_staten/13-08-14-the_cost_of_prism_will_be_
larger_than_itif_projects> as high as $180 billion, or 25 percent of
industry revenue, based on the size of the cloud computing, web hosting and
outsourcing markets and the worst-case scenario for damages. 

The business effect of the disclosures about the N.S.A. is felt most in the
daily conversations between tech companies with products to pitch and their
wary customers. The topic of surveillance, which rarely came up before, is
now "the new normal" in these conversations, as one tech company executive
described it. 

"We're hearing from customers, especially global enterprise customers, that
they care more than ever about where their content is stored and how it is
used and secured," said John E. Frank, deputy general counsel at Microsoft,
which has been publicizing that it allows customers to store their data in
Microsoft data centers in certain countries. 

At the same time, Mr. Castro said, companies believe the federal government
is only making a bad situation worse.

"Most of the companies in this space are very frustrated because there
hasn't been any kind of response that's made it so they can go back to their
customers and say, 'See, this is what's different now, you can trust us
again,' " he said.

In some cases, that has meant forgoing potential revenue. 

Though it is hard to quantify missed opportunities, American businesses are
being left off some requests for proposals from foreign customers that
previously would have included them, said James Staten, a cloud computing
analyst at Forrester who has read clients' requests for proposals. There are
German companies, Mr. Staten said, "explicitly not inviting certain American
companies to join."

He added, "It's like, 'Well, the very best vendor to do this is IBM and you
didn't invite them.' " 

The result has been a boon for foreign companies. 

Runbox, a Norwegian email service that markets itself as an alternative to
American services like Gmail and says it does not comply with foreign court
orders seeking personal information, reported a 34 percent annual increase
in customers after news of the N.S.A. surveillance. 

Brazil and the European Union, which had used American undersea cables for
intercontinental communication, last month decided to build their own cables
between Brazil and Portugal, and gave the contract to Brazilian and Spanish
companies. Brazil also announced plans to abandon Microsoft Outlook for its
own email system that uses Brazilian data centers.

Mark J. Barrenechea, chief executive of OpenText, Canada's largest software
company, said an anti-American attitude took root after the passage of the
<http://topics.nytimes.com/top/reference/timestopics/subjects/u/usa_patriot_
act/index.html?inline=nyt-classifier> Patriot Act, the counterterrorism law
passed after 9/11 that expanded the government's surveillance powers. 

But "the volume of the discussion has risen significantly post-Snowden," he
said. For instance, after the N.S.A. surveillance was revealed, one of
OpenText's clients, a global steel manufacturer based in Britain, demanded
that its data not cross United States borders.

"Issues like privacy are more important than finding the cheapest price,"
said Matthias Kunisch, a German software executive who spurned United States
cloud computing providers for Deutsche Telekom. "Because of Snowden, our
customers have the perception that American companies have connections to
the N.S.A." 

Security analysts say that ultimately the fallout from Mr. Snowden's
revelations could mimic what happened to Huawei, the Chinese software
company, which was forced to abandon major acquisitions and contracts when
American lawmakers claimed that the company's products contained a backdoor
for the People's Liberation Army of China - even though this claim was never
definitively verified. 

Silicon Valley companies have complained to government officials that their
actions were hurting their business. But companies clam up when it comes to
specifics about economic harm, whether to avoid frightening shareholders or
because it is too early to produce concrete evidence. 

"The companies need to keep the priority on the government to do something
about it, but they don't have the evidence to go to the government and say
billions of dollars are not coming to this country," Mr. Staten said. 

Some American companies say the business hit has been minor at most. 

John T. Chambers, the chief executive of Cisco Systems, said in an interview
that the N.S.A. disclosures had not affected Cisco's sales "in a major way."
Although deals in Europe and Asia have been slower to close, he said, they
are still being completed - an experience echoed by several other computing
companies. 

Still, the business blowback can be felt in other ways than lost customers.

Security analysts say tech companies have collectively spent millions and
possibly billions of dollars
<http://www.nytimes.com/2013/11/01/technology/angry-over-us-surveillance-tec
h-giants-bolster-defenses.html> adding state-of-the-art encryption features
to consumer services, like Google search and Microsoft Outlook, and to the
cables that link data centers at Google, Yahoo and other companies. 

IBM said in January that it would spend $1.2 billion to build 15 new data
centers, including in London, Hong Kong and Sydney, to lure foreign
customers that are sensitive about the location of their data.
Salesforce.com announced similar plans this month. 

Meanwhile, lawmakers, including in Germany, are considering legislation that
would make it costly or even technically impossible for American tech
companies to operate inside their borders. 

Some government officials say laws like this could have a motive other than
protecting privacy. Shutting out American companies "means more business for
local companies," Richard A. Clarke, a former White House counterterrorism
adviser, said last month.

Original URL:

http://www.nytimes.com/2014/03/22/business/fallout-from-snowden-hurting-bott
om-line-of-tech-companies.html?emc=edit_tu_20140321
<http://www.nytimes.com/2014/03/22/business/fallout-from-snowden-hurting-bot
tom-line-of-tech-companies.html?emc=edit_tu_20140321&nl=technology&nlid=4223
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