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Global winners and losers post-Snowden

Jay Cline | Sept. 5, 2013
EU privacy hawks and U.S. cloud providers have seen their near-term outlooks swing following the former NSA contractor's disclosures.

Within a week of the first Snowden revelations, however, the bill was dead for the summer. Trust in America as an honest broker on privacy had precipitously dropped. When European politicians return to work next week to renew their reform of data protection, the privacy hawks will be in the driver's seat.

Loser: U.S. cloud providers
Cloud computing was always a tough sell in Europe. This was for two reasons: Europeans' data could move from a server in Europe to a server in a country with lower privacy standards, putting their human rights at risk, and all the cloud-computing jobs were in America.

Amazon Web Services was one of the first to address these concerns by creating a Europe-only cloud based in Ireland. Many American companies followed suit, and now the east part of Dublin looks like a miniature Silicon Valley. European clients were signing up, and cloud computing was on the road to acceptance. Even in Brussels, the EU adopted "binding safe processor rules," a way for cloud providers to obtain an EU housekeeping seal of approval.

Within a month of Snowden's disclosures, however, these dynamics had all changed. If data stored in the United States could theoretically be sucked up by the NSA, it was, from their perspective, no longer safe, no matter what promises the cloud provider made in a contract. The snippets of the NSA programs that Snowden disclosed appeared to the Europeans to look like the Patriot Act on speed.

By July, German government officials were encouraging German businesses to stop using U.S. cloud providers. On Aug. 5, the Information Technology and Innovation Foundation released a report estimating that the Snowden revelations would cost U.S. cloud providers a 20% reduction in revenues, or $35 billion. Indeed, a small Swiss data hosting service reported a 45% increase in revenue the month following the first Snowden releases.

Winner: Law firms and consulting firms
Change and uncertainty are the mother and father of the consulting industry. As corporations face new laws and risks, they turn to outsiders closer to the action to help steer the way.

For U.S. multinationals, the task ahead is to navigate a stricter regulatory environment in Europe and find new data architectures that assure customers both at home and abroad. For U.S. providers of cloud and software-as-a-service offerings, the rest of 2013 will be a scramble to develop EU-based operations that are outside the reach of U.S. government surveillance.

U.S. firms with deep privacy benches, such as law firms Morrison and Foerster and Hogan Lovells and consultancies PricewaterhouseCoopers and Deloitte, are best positioned to aid in the post-Snowden transition.

Loser: U.S. government political capital
By the time President Bush left office, global approval ratings of the United States had fallen by some measures to 19%. The invasion and occupation of Iraq had squandered just about all of the goodwill built by Reagan's defeat of communism and Clinton's decade of prosperity. The election of Obama gave the U.S. an instant shot of credibility, sending approval ratings tracked by Gallup and the BBC to nearly 50%. The world applauded that we could overcome our slavery past and move away from bellicose unilateralism at the same time.

 

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