Are technology companies in the United States now suffering from a slow and agonizing death? In what is being called “The Snowden Effect,” the infamous former National Security Agency contractor’s disclosures revealing the extent of NSA worldwide spying efforts have prompted companies to avoid or leave US technology firms in droves. This has been especially true with regard to US-based cloud services since it was realized that most of the largest US tech companies’ cloud computing systems have had their data accessed by the NSA. This revelation has caused approximately a ten percent drop in customers from cancelled contracts, according to a survey from industry group Cloud Security Alliance. Some argue that that President Barack Obama has added fuel to the fire of tech industry problems by emphasizing how the NSA surveillance program focuses on people outside of the United States. One of the biggest problems that plague these US companies is the perception that they are giving their data directly to the NSA.

“How bad is it?” you might ask. Well, consider that companies like Google, Apple, Microsoft, Yahoo, Facebook, IBM, Hewlett-Packard, and Oracle, to name just a few, are all facing losses of billions of dollars over the next few years as a result of the NSA’s activities. The Information Technology & Innovation Foundation (ITIF) recently published a report stating that many industries as a whole could lose up to $180 billion by 2016 as a result of the debacle. Put frankly, people and companies will not use technology they don’t trust, and the United States has violently shaken the trust of the people and companies of the world.

I think we are seeing just the beginning of the problems for US tech companies, as they scramble to find a way to restore trust in their products and services. Almost all major companies are now starting to implement end-to-end encryption in an attempt to thwart NSA surveillance techniques and technology. Unfortunately for these companies, all they can hope for is to present a good façade, since the Patriot Act forces US companies to submit their data when presented with secret court orders. So, if the NSA is unable to hack or penetrate any company’s systems, it can get what it needs via court order.

The sad part of this, at least my own personal opinion, is that I cannot believe or accept the idea that the United States is the only country that has the power and technological capabilities to harvest the Internet this way. I am fairly confident that almost all major governments, from China and Russia to the United Kingdom, France, and Spain, to name a few, have the capability to do some, if not most, of the same kind of surveillance themselves. With that thought in your mind, are the companies that are leaving the United States and seeking services in other countries just jumping from one proverbial fire and into another? When you think about it, the thing that has hurt the United States the most is simply the fact that it got caught. I am sure other countries went into crisis mode in an attempt to make sure they were not the next country outed.

In my humble opinion, Pandora’s box has been opened. I am not sure there is any way to put the genie back in the bottle. The curtain has been opened, and now we have all had a good look at what lies behind it, for any world power.

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Steve Beaver (153 Posts)

Stephen Beaver is the co-author of VMware ESX Essentials in the Virtual Data Center and Scripting VMware Power Tools: Automating Virtual Infrastructure Administration as well as being contributing author of Mastering VMware vSphere 4 and How to Cheat at Configuring VMware ESX Server. Stephen is an IT Veteran with over 15 years experience in the industry. Stephen is a moderator on the VMware Communities Forum and was elected vExpert for 2009 and 2010. Stephen can also be seen regularly presenting on different topics at national and international virtualization conferences.

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8 comments for “Are US Tech Companies Suffering a Slow and Agonizing Death?

  1. January 30, 2014 at 10:45 AM

    This is getting very interesting at the moment as the EU is threatening to close down Safe Harbor as well. Which could imply that once data is in a country it may never be able to leave AND that data has to be part of the EU privacy policies and the privacy policies of the country in which it resides. The better solution would be to properly encrypt and protect the data so that no one can read it at rest and in flight, stop transferring unnecessary data, and have time limits on how long data can live. Just because we can store, does not mean we should.

    – Edward Haletky, aka Texiwill

  2. Bharzog
    January 30, 2014 at 11:08 AM

    The bottom line is that the entire global free market capitalistic system operates on trust. Facebook, Google, Amazon, Microsoft, Yahoo, et. al., al rely upon people and businesses trusting them to do the right thing. The tech world changes way too quickly for regulation to be able to keep up, so it is up to these companies to self-police and be as transparent as possible.

    Unfortunately, it is the NSA itself that is the biggest problem here. The NSA and the US Federal government have prohibited the US tech companies from disclosing the nature of the cooperation that the government has demanded of them.

  3. January 30, 2014 at 11:34 AM

    But is it really just the NSA that is the biggest problem or are they the biggest problem just because they got caught? If the NSA can do all this I have to believe that so can the other spy agencies.

  4. January 30, 2014 at 11:51 AM

    It is well known that my country operates the same practices. As Steve states the US is suffering the most because they were the one caught with their hands in the cookie jar.

  5. Pär Björklund
    January 30, 2014 at 4:36 PM

    I think the NSA scandal is about as bad as it will get. Sure other countries spy upon us as well but I don’t think they have the same capabilities and if they’re caught it won’t be as bad.

    My reasoning
    1. USA is fairly vocal about the risks of spying from china, nobody likes a big loud bully hypocrit
    2. China is fairly well known to spy on it’s own and we still use their hardware so I don’t think much would change there
    3. USA is home to most of the tech(software) and or cloud companies we rely on, no other country comes close to having as much to lose by a similar scandal
    4. UK is already known to help NSA spy on anything available so people wouldn’t be surprised
    5. I doubt spain has the money for spying and russia is seen as a haven for cyber criminals so a spying scandal likely wouldn’t hurt as much

    There’s probably more that I’m forgetting now.

  6. January 30, 2014 at 7:25 PM

    Pär,

    ok I think you right on Spain but how about we substitute Israel in its place but the rest of your points I agree with except for China. I really think they are much more active with both internal and external spying.

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