the late 1990s. But a recent report published by the Washington-based Information Technology and Innovation Foundation (ITIF) estimates that the revenue losses facing US cloud providers will reach anywhere from $21 billion as a low estimate to $35 billion as a high estimate by 2016. [11] In addition to this report, the Cloud Security Alliance recently estimated that 10% of non-US companies have canceled their contracts with US-based providers since May. [12]
Google: The ongoing battle between the US intelligence community and US Internet companies is exemplified by the relationship between Google and the NSA. While Google plays a key role in the NSA's collection scheme, the company is beginning to voice its complaints with the agency. When asked recently why the company is tightening the encryption of data flowing between its processing centers, chairman Eric Schmidt stated that the improvements would "block alleged interception by the NSA". [13]
Google's move to route mainland China's users to the uncensored Chinese-language version of its service hosted in Hong Kong in 2010 brought the company into a less-than friendly spotlight. But Google's security woes reach far beyond the US or China. Brazilian legislation requiring Google to build data centers and cloud infrastructure within the country's borders may cost the company billions in the coming years.
Recently, Richard Salgado - Google's director for law enforcement and information security - stated that efforts from governments to limit the cross-border flows of information "could have severe unintended consequences, such as a reduction in data security, increased cost, decreased competitiveness, and harm to consumers". [14] It turns out that the NSA's actions have resulted in quite a few unintended consequences since the Snowden leaks started. The backlash from US surveillance has impacted several large US tech firms like Google, Cisco Systems, IBM, HP and Microsoft.
Cisco Systems: "I've never seen this before." Those were the words of Cisco Systems CEO John Chambers on a conference call to analysts in November this year as he sought an explanation for the company's sudden drop in emerging market networking gear sales. First quarter orders in China plunged 18% from a year earlier. Q1 2014 orders in Russia tumbled 30% and in Brazil 25%.
As the world's largest provider of computer networking equipment, Cisco represents a vital player in the United States' dominant position in the technology market. In a November conference call, Chambers warned of the threat of further "challenging political dynamics" in China.
International Business Machines (IBM), a global supplier of networking equipment and services, saw its third-quarter 2013 revenue in China plunge 22%.
Microsoft and Hewlett-Packard also reported a drop in Q3 revenue from China, but the companies have been less vocal about the particular details of these declines.
Other companies are also very vulnerable to the sentiments of Chinese customers. Take Qualcomm. The smart-phone chip maker derives about half of its annual revenue from China - or $12.3 billion in 2012. Significant exposure to the Chinese market makes Qualcomm (and others like it) increasingly sensitive to volatility that may result from the ongoing political tension between the US and China.
US tech companies are likely to experience continued decreases in market share, sales and a heightened degree of tension that may accompany their operations in China. This is an unfortunate reality for US tech giants, which are essentially being punished for the regulatory overreach of the US intelligence community. The lesson from this ongoing situation should be clear: the world must work to de-politicize the interplay between technology companies and governments.
A recent letter from US Internet companies to the Obama Administration highlights the growing divergence in perspective maintained between the two sides. The letter - released to the public on December 9 from AOL, Apple, Facebook, Google, LinkedIn, Microsoft, Twitter, and Yahoo to the Intelligence Community - states, "We urge the US to take the lead and make reforms that ensure that government surveillance efforts are clearly restricted by law, proportionate to the risks, transparent and subject to independent oversight."
Last week, a report was released following a probe by a White House panel into the NSA's activities. It listed 46 recommendations for an overhaul of NSA activity, the most significant being a call for the NSA to shift their innumerable bits of stored data back to the private sector. The panel also (surprisingly) admits that there is no evidence that the mass collection of citizens' data is an effective means of preventing terrorism. This comes on the heels of a US court ruling that the NSA's collection efforts were unconstitutional.
Meanwhile, the recent fallout may prompt Beijing to take a more active role in promoting the development of China's indigenous software and hardware industry. [15] While not prohibited from purchasing Western-made technology services and equipment, Chinese firms will likely rely increasingly on domestic providers of technology equipment and services such as Lenovo, Huawei and ZTE. Ironically, the US intelligence community may have sown the seeds of the very relationship it sought to prevent. |
