The Economic Cost of PRISM on the U.S. Cloud Computing Industry
WASHINGTON (August 5, 2013) - The United States is the international leader in cloud computing, dominating every segment of the nearly $130 billion industry. However, the recent PRISM revelations may lead to significant changes in the global cloud market, negatively impacting U.S. cloud providers in the process. The Information Technology and Innovation Foundation (ITIF) estimates the U.S. cloud computing industry could stand to lose between $22 and $35 billion in total revenue by 2016.
"Many foreign customers are now deciding whether the risks of storing data with a U.S. company are worth the benefits, and foreign cloud service providers will ruthlessly exploit this perceived weakness to gain market share," says Daniel Castro, author of the new report "How Much Will PRISM Cost the U.S. Cloud Computing Industry?" and a Senior Analyst with ITIF. "In addition, some countries may use PRISM as an excuse to enact a series of protectionist policies to restrict access to their markets and promote their domestic cloud providers."
While the data are still coming in, making any estimate preliminary, Castro notes this combination of factors could cost the United States 10 to 20 percent of the foreign cloud market by 2016, when the industry is expected to pass $200 billion worldwide. This estimate is based in part on recent polling of foreign consumers. A survey by the Cloud Security Alliance found that 10 percent of foreign respondents had canceled a project with an American-based cloud computing provider following the PRISM revelations.
The percentage lost to foreign competitors could be even higher if governments enact further protectionist trade barriers that effectively cut out U.S. providers. Already, German data protection authorities have called for suspending all data transfers to American companies.
To address this growing challenge and reduce the impact on the U.S. economy Castro argues the U.S. government needs to proactively set the record straight about what information it does and does not have access to and how this level of access compares to other countries. The government should also work to establish international transparency requirements so that it is clear what information U.S.-based and non-U.S.-based companies are disclosing to both domestic and foreign governments.
"There is huge growth potential in cloud computing right now in foreign markets, and U.S. businesses run the risk of being sidelined at a crucial moment," Castro adds. "In addition to the privacy and civil liberties debates going on, we need to have a serious conversation about the potential economic costs of electronic government surveillance."
The Information Technology and Innovation Foundation (ITIF) is a non-profit, non-partisan think tank whose mission is to formulate and promote public policies to advance technological innovation and productivity internationally, in Washington, and in the states. Recognizing the vital role of technology in ensuring prosperity, ITIF focuses on innovation, productivity, and digital economy issues. Learn more at www.itif.org.