Over the past several months, the disclosures by former National Security Agency (NSA) contractor Edward Snowden have hit internet companies hard. Lately, there has been a steady migration to the cloud services. People were increasingly comfortable with storing important documents online. The NSA disclosures have stopped this trend in its tracks, and could possibly lead to its reversal.

1. 92 GlobeAsia January 2014
Technology
Can cloud computing
survive the NSA
disclosures?
not just named some of the most
valuable companies in the world.
The cloud computing market (which
estimates have valued at over $200
billion) is seriously in jeopardy. A recent
survey by the industry group Cloud
Security Alliance had over half its non-
US members report that they are less
likely to use US-based cloud services in
the future. Even more troubling, a good
10% of these members have gone on to
cancel their agreements with US-based
cloud services.
The lack of trust is not only evident
among individuals. Governments
around the world have been tripping
over themselves trying to limit their
exposure to the long arm of the NSA.
This is particularly evident in the
so-called BRIC countries, nations
considered to have successfully
navigated the seas towards advanced
economic development.
Brazil’s President Dilma Rousseff
– herself a target of NSA spying – has
been particularly vocal about the need
for increased internet governance to
combat illegal snooping. Rousseff went
so far as to lodge a formal protest and
cancel a planned state visit to the US in
protest at the revelations.
Russia, for its part, has also
(somewhat hypocritically) derided
US encroachment of civil liberties
and offered Snowden temporary
asylum. The country has also taken
further steps to ensure that its official
data is safe – and it is not alone. In
the subcontinent for example, recent
reports out of India indicate that the
country could ban services like Yahoo
and Gmail for official communication
even before the new year rolls around.
India’s Deputy National Security
Advisor has asked the Department
of Telecom to look into requiring
telecommunications and internet
companies to route their traffic through
the NIXI (National Internet Exchange
ver the past several
months, the disclosures
by former National
Security Agency (NSA)
contractor Edward
Snowden have hit internet companies
hard. Lately, there has been a steady
migration to the cloud services. People
were increasingly comfortable with
storing important documents online.
The NSA disclosures have stopped this
trend in its tracks, and could possibly
lead to its reversal.
According to a report in the
Financial Times, the NSA disclosures
could cost tech firms such as Google
and Apple $35 billion over the next
three years. The negative effects on
the industry itself are likely to be
especially acute, given the increased
reliance the modern economy places
on knowledge-based industries.
Studies quoted by a recent Financial
Post article indicate that “products and
services that rely on cross-border data
flows are expected to add an estimated
$1 trillion in value to the US economy
annually over the next 10 years.”
Of course this increased value will
never materialize if consumers are
unable to trust that data they store
in the cloud is free from prying eyes.
More worrying, perhaps, than strict
dollars and cents, the revelations have
cost these companies trust and that
could have a permanent effect on the
industry.
US-based tech companies are
struggling
The success of companies like Google,
Apple, Amazon and Facebook are
wholly predicated on whether or not
customers trust their data to these
firms. Unfortunately, if anything,
people have become even more
concerned about their privacy. This
would not be such a concern if I had

2. January 2014 GlobeAsia 93
by Jason Fernandes
of India), in order to limit the ability of
foreign (read: US) intelligence agencies
to spy on domestic traffic.
China, too, has not stood by
quietly. State-owned media in China
have condemned US spying and
have strongly suggested, if not quite
mandated, that local companies stick
to buying technology from domestic
sources. Another potentially crushing
blow to US companies.
The reaction of BRIC nations
to spying is particularly important
and could be regarded as both the
proverbial canary in the mine and the
raven that croaks “never more” in Poe’s
masterpiece. That these developing
nations are introducing institutional
controls should be very worrying to
US-based tech firms.
Other developed and so-called first
world nations like Germany have also
joined the increasingly-vocal clamor
for control over citizens’ data. All this
government interest will likely lead to
increased legislation that will make it
costly for US companies to compete
overseas.
China’s reaction has been
particularly instructive, if only for the
massive negative impact it has had on
US companies. Both Qualcomm and
Cisco have found the environment
in China increasingly hostile to
their interests post-NSA disclosures.
Qualcomm recently announced that
while they continue to expect growth
in China, growth has slowed, owing to
fallout from the Snowden revelations.
Cisco, on the other hand, is in
even hotter water and was forced to
cut revenue predictions down 10% for
the quarter, again in part owing to the
backlash over the US spying scandal.
The road ahead
With the shuttering of Snowden’s email
service Lavabit and others, people are
turning to overseas services like Mega.
co.nz (run by the flamboyant Kim
Dotcom) in order to better protect their
data. Unfortunately, the overall effect has
been a gradual and perhaps permanent
erosion of trust in the concept of cloud
computing and privacy.
The news is not all bad, however.
Ultimately the fates of these major
tech companies will be determined in
large part by how they address these
allegations. It’s not too late to restore
consumer confidence if they move
swiftly. Encouragingly, companies
like Google, Yahoo and Microsoft
have shifted focus to the encryption
of data that is in transit, an area where
they were particularly susceptible to
government snooping.
Further, many of these companies,
particularly Microsoft, have taken to
voluntarily disclosing information on
the number and nature of requests
for information they receive from the
government. This is in sharp contrast
to AT&T, which has reacted instead by
clamping down on information even
further and has fought vociferously
to keep its interaction with the NSA
secret. This is a study in how not to
handle a crisis.
Possibly the only way the industry
is going to survive is if it goes on the
offensive and advocates for customer
privacy instead. Case in point, this
month Microsoft publicly declared
the US government an “advanced
persistent threat.” A designation more
commonly used for state-sponsored
terrorists, these are strong words
indeed, coming from one of the tech
industry’s behemoths.
Microsoft has clarified that it
intends to notify government and
business customers when it receives
legal orders relating to their data, and
vigorously challenge such orders when
it is prevented by law from disclosing
the data’s existence.
The only thing that can banish
secrets is the cold, hard light of truth
and if the US tech sector is to survive, it
must show an increased dedication to
data privacy and transparency.
Recent revelations indicate that
it is inevitable that, at some point,
the people of the world will be living
in a modern version of 18th century
philosopher Jeremy Bentham’s
Panopticon. The idea behind Bentham’s
theoretical construct was that humans
would self-regulate if they assumed
they were always and continuously
being watched. Revolutionaries
overthrowing Nicolae Ceausescu
learnt that Romania’s dreaded state
surveillance system functioned on
just such a Wizard of Oz-like myth of
control.
Lately we have learned that reality in
modern America is quite the opposite
and its surveillance capabilities are far in
excess of what was previously thought.
The government has massive and
far-reaching surveillance powers and
ultimately it is up netizens themselves
to stand up and reject this control by
voting with their eyeballs. Only once US
surveillance starts affecting its balance
sheet are things likely to change.
Jason Fernandes is a tech commentator
and the founder of SmartKlock.
Unfortunately, the overall effect has been a gradual and
perhaps permanent erosion of trust in the concept of
cloud computing and privacy.