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Will PRISM refract the Dollars away from US Cloud Service Providers?

The recent revelations of PRISM surveillance program in operation by USA's National Security Agency (NSA), appear to have far more implications on the financial side.  For starters, PRISM is United States of America's government code name for electronic data collection & data mining.   This was an effort towards the fight against terrorism.   This program appears to be in existence for six years, but came to light recently and has caught world's attention with mixed reactions.  Some of the prominent international companies headquartered in USA have been identified as being part of this program.

A new dimension to this episode is that there is a financial angle, from the context of doing business with U.S. based companies (or the companies under U.S. jurisdiction), more specifically to US cloud service providers.

As per Gartner's research, the public cloud services market which was at $111Billion in 2012, is expected to double in the next five years.   This growth projection is monumental especially when compared to the global IT market growth, which is only 3 percent.   Thus in many ways, cloud market is a gold rush dominated by US players, who are distantly rivalled by European and Asian cloud service providers.   The rest of the world has been taking measures to become competitive in the cloud space, with some backed by government factors in the respective regions.  However, this move may be expedited with the leaked details of PRISM surveillance program.

The recent report from Information Technology and Innovation Foundation, a think tank from USA, predicts that the US CSPs are expected to lose 20 to 35 B in the next five years -   The figures derived by the author, by his own admission is not scientific, but rather an inference based on various factors, such as initial reactions from various sections of the society and smaller samples of financial measures.   Although, the extent of impact may be debatable, there certainly is a strong evidence of some material impact to US cloud service providers.   The report also mentions about certain moves initiated in the European region in direct response to PRISM leaks.

One cannot resist drawing parallels on this episode to the formation of unified currency (Euro) in the European region back in the late 1990s.   That move was primarily born out of political initiatives from Germany and France.  Although, there were many reasons behind that move, it was also seen as a competition and check to US Dollar's dominance in the international market.

With Europe coming out of recession, the technology spending is only expected to go up and the US cloud service providers will be better served to take a notice on this situation and take steps to improve the customers' confidence on the confidentiality of their proprietary information.   After all, as the saying goes, "necessity is the mother of invention" and the need of the hour is the strong assurance of data security.

Comments

Nice article ; Especially, I like the reference to Euro creation:)

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