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NSA spying fiasco sending customers overseas

Brandon Butler | Sept. 24, 2013
NSA spy program cold lead to loss of business for some hosting vendors, experts say

The spectacle of National Security Agency contractor Edward Snowden exposing the covert spying nature of US federal officials has sent ripple waves through the technology industry -- especially in the outsourcing arena.

Experts predict the NSA fiasco could result in the loss of business for some hosting vendors, but it's hard to say exactly what the impact has been or will be.

The head of a European cloud computing provider said recently though that he's seen a "measurable impact" from companies looking to use its services to escape what they fear could be the prying eyes of the US NSA.

"It has not been a profound surge, but there is definitely a measureable impact," says Robert Jenkins, co-founder and CTO of Cloud Sigma, which is headquartered in Switzerland and has data centers across Europe and the United States. "We've definitely seen cases where people are turning to us because of this."

Forrester analyst and cloud tracker James Staten predicted this could happen in a blog  post in the summer. Information Technology & Innovation Foundation (ITIF) estimated in a report that the US cloud computing market could stand to lose up to $35 billion by 2016 because of vendors bypassing US providers and looking to overseas competitors. Staten says that's the low end of an estimate though.

It's "naïve" to believe that other countries don't have similar surveillance programs ongoing, which could depress not just the US cloud market, but the international outsourcing market as well. If those concerns do turn into real impacts, he estimates the worldwide outsourcing market could stand to lose up to $180 billion. That's the high-end of his prediction and he doesn't necessarily believe it will happen, but it could, he says.  

Some users are already getting out of US providers though. Take Alexander Ljungberg, co-founder, WireLoad, which is an online service that specializes in e-mail migrations the company can take massive stocks of email systems and translate them from one platform to another. Ljungberg and his partner did not want to use a U.S. cloud provider for the massive computing power that are needed for these jobs because of concerns over peering officials potentially being able to intercept his customer's e-mail communications. WireLoad uses CloudSigma's Swiss data center for all its migrations.

"Privacy laws in Switzerland are internationally known to be very good, so we're just more comfortable knowing that it's less likely there will be some kind of prying by the government," he says, adding that it's a selling point for customers. WiredLoad was using CloudSigma's services even before the NSA stories broke this summer, but he says privacy and security concerns were a major factor in deciding to use a European provider. If the company had been in a U.S. provider this summer, Ljungberg says he would have switched over.


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