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Surveillance Costs: NSA Impact on the Economy and Cyber Security


Economic forecasts after the Snowden leaks have predicted significant, ongoing losses for the cloud-computing industry in the next few years. An August 2013 study by the Information Technology and Innovation Foundation (ITIF) estimated that revelations about the NSA’s PRISM program could cost the American cloud computing industry $22 to $35 billion over the next three years.

 On the low end, the ITIF projection suggests that U.S. cloud computing providers would lose 10 percent of the foreign market share to European or Asian competitors, totaling in about $21.5 billion in losses; on the high-end, the $35 billion figure represents about 20 percent of the companies’ foreign market share. Because the cloud computing industry is undergoing rapid growth right now a 2012 Gartner study predicted global spending on cloud computing would increase by 100 percent from 2012 to 2016, compared to a 3 percent overall growth rate in the tech industry as a whole vendors in this sector are particularly vulnerable to shifts in the market. Failing to recruit new customers or losing a competitive advantage due to exploitation by rival com-panies in other countries can quickly lead to a dwindling market share. The ITIF study further notes that “the percentage lost to foreign com-petitors could go higher if foreign governments enact protectionist trade barriers that effectively cut out U.S. providers,” citing early calls from German data protection authorities to suspend the U.S.-EU Safe Harbor program (which will be discussed at length in the next section).

 As the R Street Policy Study highlights, “Ironically, the NSA turned the competitive edge U.S. companies have in cloud computing into a liability, especially in Europe.”

Staten highlighted two additional impacts not considered in the ITIF study. The first is that U.S. customers—not  just foreign companies—would also avoid US cloud providers, especially for international and overseas business. The ITIF study predicted that American companies would retain their domestic market share, but Staten argued that the economic blowback from the revelations would be felt at home, too. “

Moreover, the analysis highlighted a second and “far more costly” impact: that foreign cloud providers, too, would lose as much as 20 percent of overseas and domestic business because of similar spying programs conducted by other governments.

 Staten predicts that as the surveillance landscape around the world becomes more clear, it could have a serious negative impact on all hosting and outsourcing services, resulting in a 25 per-cent decline in the overall IT services market, or about $180 billion in losses

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