Has NSA spying poisoned the growing cloud computing industry?

Domestic spying by our nation’s security services have truly injured our nation’s commitment to civil liberties, and have made us all wonder how safe our privacy truly is. The revelations made by Edward Snowden—plus further discoveries such as the NSA intercepting computer purchases to install transmitters to track and spy on consumers, and turning on your webcam to look at you without your knowledge—have triggered demonstrations across the country, a rise in awareness of privacy software such as Tor and use of cryptocurrencies like Bitcoin. Yet people I talk to—both in the real world and in cyberspace—are cynical about the chances of genuine reform, and it always comes back to this: Does it hurt big business?

Such is life when our economy is as corporatist as it is. Things will only change if the big corporations that stand to make a ton of cash feel threatened. Even though there have been some noise made by Verizon, Google, Apple, and other companies, most people shrug these off as just public relations, just throwing a bone to their privacy minded consumers but not actually changing anything on the back-end. However, as a recent paper by the R Street Institute’s (disclosure: I am an associate policy analyst there) Steven Titch explains, NSA spying may have potentially poisoned one of the greatest developments of the Web 2.0: cloud computing.

Cloud computing is the “technical” term for services like Dropbox, Google Drive, Amazon’s streaming MP3 service, Hulu, and even Chromebooks. It’s simply taking what you would normally do on your computer—whether storage, media playback, document editing, or any number of things—and doing it on the web, hosted by a server somewhere else. (This also includes social networks such as Facebook, Twitter, Tumblr, Pinterest, and even Google+, if you use it.) Of course, cloud computing is much more than that, and extends into such things as corporate project management. A real shocker from the R Street paper is that:

Elsewhere, John Henry Clippinger, ID3 executive director at the Massachusetts Institute of Technology Media Lab, told an interviewer: “What people do not appreciate is the economic damage…that the NSA has done to the cloud computing business for the U.S.” He noted a number of European banks no longer want to host data in the United States and that Salesforce.com, which provides highly sensitive cloud-based sales leads and customer information, has lost a major client.8 Salesforce.com’s CEO has felt the need to publicly state that it was not part of the PRISM program.9 It appears the NSA’s aggressive surveillance has created an overall fear among U.S. companies that there is “guilt by association” from which they need to proactively distance themselves.

Salesforce.com is probably one of the largest corporate project management providers in the world, and thanks to PRISM, it lost a major client. That’s just one company and one client that we know about. In the next paragraph, Titch cites an analyst at research firm Forrester Research, who claims that the impact of PRISM will cost the industry $180 billion by 2016, and that corporations and governments will be spooked enough by the NSA that they will dramatically scale back their cloud computing developments.

In an economy that, despite the president’s claims is recovering, still apparently requires that Congress acts urgently to extend unemployment insurance, this impact is disastrous.

The report outlines the industry backlash to PRISM, namely how the loss of trust in services is starting to hurt businesses’ bottom lines. It also puts forward a reform plan: dismantle PRISM, pass legislation to explicitly protect privacy in the Internet cloud, and establish better standards for transparency and accountability, including moving oversight away from the FISA courts and towards more ordinary courts.

Will these work? The more cynical among us may just say that the public hasn’t lost that much trust, and they will continue to blithely go on without thinking, so no real change will ever happen. (This is, regrettably, a standard response from many libertarians.) But I disagree. In the short-term, things may look bleak. But as Titch notes, there are real economic consequences from NSA spying that will lead to change. Moreover, Americans are becoming more aware of what their government is doing, and are agitating for change. It will not be immediate; it will take time. But we are seeing change happen.

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