 "Snooping saga: NSA spying costs US tech firms")
Microsoft has lost customers, including the government of Brazil. IBM is spending more than a billion dollars to build data centres overseas to reassure foreign customers that their information is safe from prying eyes in the United States government. And, tech companies abroad, from Europe to South America, say they are gaining customers that are shunning United States providers, suspicious because of the revelations by Edward J Snowden that tied these providers to the National Security Agency's vast surveillance programme.
Even as Washington grapples with the diplomatic and political fallout of Snowden's leaks, the more urgent issue, companies and analysts say, is economic. Technology executives, including Mark Zuckerberg of Facebook, raised the issue when they went to the White House on Friday for a meeting with President Obama.
It is impossible to see now the full economic ramifications of the spying disclosures - in part because most companies are locked in multiyear contracts - but the pieces are beginning to add up as businesses question the trustworthiness of American technology products. The confirmation hearing last week for the new NSA chief, the video appearance of Snowden at a technology conference in Texas and the drip of new details about government spying have kept attention focused on an issue that many tech executives hoped would go away.
Despite the tech companies' assertions that they provide information on their customers only when required under law - and not knowingly through a back door - the perception that they enabled the spying program has lingered.
"It's clear to every single tech company that this is affecting their bottom line," said Daniel Castro, a senior analyst at the Information Technology and Innovation Foundation, who predicted that the United States cloud computing industry could lose $35 billion by 2016.
Forrester Research, a technology research firm, said the losses could be as high as $180 billion, or 25 per cent of industry revenue, based on the size of the cloud computing, web hosting and outsourcing markets and the worst case for damages.
The business effect of the disclosures about the NSA is felt most in the daily conversations between tech companies with products to pitch and their wary customers. The topic of surveillance, which rarely came up before, is now "the new normal" in these conversations, as one tech company executive described it.
"We're hearing from customers, especially global enterprise customers, that they care more than ever about where their content is stored and how it is used and secured," said John E Frank, deputy general counsel at Microsoft, which has been publicising that it allows customers to store their data in Microsoft data centres in certain countries.
At the same time, Castro said, companies say they believe the federal government is only making a bad situation worse.
"Most of the companies in this space are very frustrated because there hasn't been any kind of response that's made it so they can go back to their customers and say, 'See, this is what's different now, you can trust us again,' " he said.
In some cases, that has meant forgoing potential revenue.
Though it is hard to quantify missed opportunities, American businesses are being left off some requests for proposals from foreign customers that previously would have included them, said James Staten, a cloud computing analyst at Forrester who has read clients' requests for proposals. There are German companies, Staten said, "explicitly not inviting certain American companies to join." He added, "It's like, 'Well, the very best vendor to do this is IBM, and you didn't invite them.' "
The result has been a boon for foreign companies.
Runbox, a Norwegian email service that markets itself as an alternative to American services like Gmail and says it does not comply with foreign court orders seeking personal information, reported a 34 per cent annual increase in customers after news of the NSA surveillance.
Brazil and the European Union, which had used American undersea cables for intercontinental communication, last month decided to build their own cables between Brazil and Portugal, and gave the contract to Brazilian and Spanish companies. Brazil also announced plans to abandon Microsoft Outlook for its own email system that uses Brazilian data centres.
Mark J Barrenechea, chief executive of OpenText, Canada's largest software company, said an anti-American attitude took root after the passage of the Patriot Act, the counterterrorism law passed after 9/11 that expanded the government's surveillance powers. But "the volume of the discussion has risen significantly post-Snowden," he said. "Issues like privacy are more important than finding the cheapest price," said Matthias Kunisch, a German software executive who spurned United States cloud computing providers for Deutsche Telekom. "Because of Snowden, our customers have the perception that American companies have connections to the NSA."
Silicon Valley companies have complained to government officials that federal actions are hurting American technology businesses. But companies fall silent when it comes to specifics about economic harm, whether to avoid frightening shareholders or because it is too early to produce concrete evidence.
"The companies need to keep the priority on the government to do something about it, but they don't have the evidence to go to the government and say billions of dollars are not coming to this country," Staten said.
Some American companies say the business hit has been minor at most.
John T Chambers, the chief executive of Cisco Systems, said in an interview that the NSA disclosures had not affected Cisco's sales "in a major way." Although deals in Europe and Asia have been slower to close, he said, they are still being completed - an experience echoed by several other computing companies.
Still, the business blowback can be felt in other ways than lost customers.
TECH SHIFT
$35 bn
Information Technology and Innovation Foundation's estimation of losses in the US cloud computing sector by 2016
34%
Annual rise in customers of Runbox, a Norwegian email service that markets itself as an alternative to US services such as Gmail and says it does not comply with foreign court orders seeking personal information, after news of NSA surveillance
$1.2 bn
IBM's estimated expenditure on setting up 15 new data centres, including in London, Hong Kong and Sydney, to lure foreign customers sensitive about the location of their data
* Microsoft lost customers, including the government of Brazil, after revelations of snooping by the US came to light
* Germany and Brazil, where it was revealed the NSA spied on government leaders, have been particularly adversarial towards US companies and the government
* CISCO said NSA disclosures had not affected sales "in a major way", though closing deals in Europe and Asia has taken longer
Even as Washington grapples with the diplomatic and political fallout of Snowden's leaks, the more urgent issue, companies and analysts say, is economic. Technology executives, including Mark Zuckerberg of Facebook, raised the issue when they went to the White House on Friday for a meeting with President Obama.
It is impossible to see now the full economic ramifications of the spying disclosures - in part because most companies are locked in multiyear contracts - but the pieces are beginning to add up as businesses question the trustworthiness of American technology products. The confirmation hearing last week for the new NSA chief, the video appearance of Snowden at a technology conference in Texas and the drip of new details about government spying have kept attention focused on an issue that many tech executives hoped would go away.
Despite the tech companies' assertions that they provide information on their customers only when required under law - and not knowingly through a back door - the perception that they enabled the spying program has lingered.
"It's clear to every single tech company that this is affecting their bottom line," said Daniel Castro, a senior analyst at the Information Technology and Innovation Foundation, who predicted that the United States cloud computing industry could lose $35 billion by 2016.
Forrester Research, a technology research firm, said the losses could be as high as $180 billion, or 25 per cent of industry revenue, based on the size of the cloud computing, web hosting and outsourcing markets and the worst case for damages.
The business effect of the disclosures about the NSA is felt most in the daily conversations between tech companies with products to pitch and their wary customers. The topic of surveillance, which rarely came up before, is now "the new normal" in these conversations, as one tech company executive described it.
"We're hearing from customers, especially global enterprise customers, that they care more than ever about where their content is stored and how it is used and secured," said John E Frank, deputy general counsel at Microsoft, which has been publicising that it allows customers to store their data in Microsoft data centres in certain countries.
At the same time, Castro said, companies say they believe the federal government is only making a bad situation worse.
"Most of the companies in this space are very frustrated because there hasn't been any kind of response that's made it so they can go back to their customers and say, 'See, this is what's different now, you can trust us again,' " he said.
In some cases, that has meant forgoing potential revenue.
Though it is hard to quantify missed opportunities, American businesses are being left off some requests for proposals from foreign customers that previously would have included them, said James Staten, a cloud computing analyst at Forrester who has read clients' requests for proposals. There are German companies, Staten said, "explicitly not inviting certain American companies to join." He added, "It's like, 'Well, the very best vendor to do this is IBM, and you didn't invite them.' "
The result has been a boon for foreign companies.
Runbox, a Norwegian email service that markets itself as an alternative to American services like Gmail and says it does not comply with foreign court orders seeking personal information, reported a 34 per cent annual increase in customers after news of the NSA surveillance.
Brazil and the European Union, which had used American undersea cables for intercontinental communication, last month decided to build their own cables between Brazil and Portugal, and gave the contract to Brazilian and Spanish companies. Brazil also announced plans to abandon Microsoft Outlook for its own email system that uses Brazilian data centres.
Mark J Barrenechea, chief executive of OpenText, Canada's largest software company, said an anti-American attitude took root after the passage of the Patriot Act, the counterterrorism law passed after 9/11 that expanded the government's surveillance powers. But "the volume of the discussion has risen significantly post-Snowden," he said. "Issues like privacy are more important than finding the cheapest price," said Matthias Kunisch, a German software executive who spurned United States cloud computing providers for Deutsche Telekom. "Because of Snowden, our customers have the perception that American companies have connections to the NSA."
Silicon Valley companies have complained to government officials that federal actions are hurting American technology businesses. But companies fall silent when it comes to specifics about economic harm, whether to avoid frightening shareholders or because it is too early to produce concrete evidence.
"The companies need to keep the priority on the government to do something about it, but they don't have the evidence to go to the government and say billions of dollars are not coming to this country," Staten said.
Some American companies say the business hit has been minor at most.
John T Chambers, the chief executive of Cisco Systems, said in an interview that the NSA disclosures had not affected Cisco's sales "in a major way." Although deals in Europe and Asia have been slower to close, he said, they are still being completed - an experience echoed by several other computing companies.
Still, the business blowback can be felt in other ways than lost customers.
TECH SHIFT
$35 bn
Information Technology and Innovation Foundation's estimation of losses in the US cloud computing sector by 2016
34%
Annual rise in customers of Runbox, a Norwegian email service that markets itself as an alternative to US services such as Gmail and says it does not comply with foreign court orders seeking personal information, after news of NSA surveillance
$1.2 bn
IBM's estimated expenditure on setting up 15 new data centres, including in London, Hong Kong and Sydney, to lure foreign customers sensitive about the location of their data
* Microsoft lost customers, including the government of Brazil, after revelations of snooping by the US came to light
* Germany and Brazil, where it was revealed the NSA spied on government leaders, have been particularly adversarial towards US companies and the government
* CISCO said NSA disclosures had not affected sales "in a major way", though closing deals in Europe and Asia has taken longer
© 2014 The New York Times News Service