The Information Technology & Innovation Foundation, ranked as the most authoritative science and technology think tank in the U.S. (second in the world behind Max Planck Institutes of Germany), has just released its latest report on the impact of the existence and disclosure of the broad NSA national and international spying programs.
It was initially reported that the revenue loss range would be between $21.5 billion and $35 billion, mostly affecting U.S. cloud service providers. However, they have gone back and researched the impact and found it to be both far larger and far broader than originally estimated. In fact, it appears the surveillance programs could cause a number of U.S. technology firms to fail outright or to be forced into bankruptcy as they reorganize for survival. The damage has also since spread to domestic aerospace and telephony service providers.
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The programs identified in the report are PRISM; the program authorized by the FISA Amendments act, which allowed search without the need for a warrant domestically and abroad, and Bullrun; the program designed to compromise encryption technology worldwide.
The report ends in the following recommendations:
- Increase transparency about U.S. surveillance activities both at home and abroad.
- Strengthen information security by opposing any government efforts to introduce backdoors in software or weaken encryption.
- Strengthen U.S. mutual legal assistance treaties (MLATs).
- Work to establish international legal standards for government access to data.
- Complete trade agreements like the Trans Pacific Partnership that ban digital protectionism, and pressure nations that seek to erect protectionist barriers to abandon those efforts.
The 2014 survey indicates that 25 percent of companies in the UK and Canada plan to pull data out of the U.S. Of those responding, 82 percent indicated they now look at national laws as the major deciding factor with regard to where they put their data.
Software-as-a-Service (SaaS) company Birst indicated that its European customers are refusing to host information in the U.S. for fear of spying.
Salesforce, another SaaS company, revealed that its German insurance client pulled out of using the firm. In fact, Salesforce faced major short-term sales losses and suffered a $124 million deficit in the fiscal quarter after the NSA revelations according to the report.
Cisco, the U.S. firm that leads the networking market, reported that sales was interrupted in Brazil, China and Russia as a result of the belief that the U.S. had placed backdoors in its networking products. Cisco’s CEO, John Chambers, tied his revenue shortfall to the NSA disclosure.
Servint, a U.S. Web Hosting company, reported losing half of its international clients as a result of the NSA Disclosure.
Qualcomm, IBM, Microsoft and Hewlett-Packard have all reported significant adverse revenue impact in China from the NSA disclosure.
A variety of U.S. companies including Cisco, McAfee/Intel, Apple and Citrix Systems were all dropped from the approved list for the Chinese government as a result of the NSA disclosure.
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But it isn’t even just tech companies that have lost significant customers and revenues.
Boeing lost a major defense contract to Saab AB to replace Brazil’s aging fighter jets due to the disclosure.
Verizon was dropped by a large number German government facilities for fear Verizon would open them up to wiretapping and other surveillance.
NSA surveillance hurts U.S., creates opportunity for competing foreign firms
This has created significant opportunity for foreign firms competing with U.S. firms.
For instance, Hortensecurity (Germany) now markets itself as “Cloud Services Made in Germany” and safe from the NSA.
Cloudwatt (France) has joined a nationalistic consortium of companies called “Sovereign Cloud” (cool name) and advertises as being resistant to NSA spying.
F-Secure. which competes with Dropbox and Microsoft OneDrive, has altered its marketing to include the language that they will not share data with the U.S. government as they move against these U.S. firms.
Additional findings include broad protectionist measures in a variety of regions using this disclosure to lock U.S. firms out of the country and favor local firms and the creation of anti-U.S. technology networks.
In addition, the governments are aggressively funding domestic startups that can replace U.S. companies in their country. Australia, China, Russia, and India have passed laws making it illegal for personal information to be stored out of the country making it far more difficult for U.S. firms to do business there. China further launched an IOE movement to prevent banks from buying from IBM, Oracle and EMC.
Government surveillance might just cripple and eliminate U.S. tech dominance
The report concludes that these changes taken in total will cripple and could virtually eliminate U.S. dominance in technology internationally. While it doesn’t address what U.S. companies are doing, it is likely many of them are looking at U.S. tech companies adversely because of the double hit of both the spying program and the inability to adequately secure either the information about the program itself or information in general (thus the information that was captured is also at risk).
The irony here is that if the U.S. loses the technology industry and it moves to Asia and Europe the U.S. spy agencies will lose virtually all of their spying digital capability anyway, or it will drop to the same level as a non-tech third-world country, because they won’t be able to force the foreign firms to give them inside access.
It could also be noted that they will also lose the capability to develop leading tech-based tools and weapons as those skills also migrate out of the U.S. So, in a foolish effort to make the country safer, not only is the collateral damage unacceptable to the U.S. economy it will likely result in a dramatically reduced intelligence capability. This is a level of self-correction the U.S. might not recover from.