The German government will end its contract with Verizon. Brazil dumped Boeing for Swedish company Saab to replace its fighter jets. Sources told Bloomberg News “The NSA problem ruined it” for the U.S. defense contractor.
Unfettered NSA spying has cost U.S. companies up to $180 billion in lost overseas business. The number is expected to grow.
Cisco saw a ten percent drop in overseas business. Dropbox and Amazon Cloud Services reported immediate drops in their sales abroad. Qualcomm, IBM, Microsoft, and HP all reported declines in sales in China due to NSA spying. The total costs to U.S. businesses could reach as high as $180 billion.
ServInt Corporation, a Virginia-based company providing website hosting services, has seen a 30 percent decline in foreign customers since the NSA leaks began in June 2013, said Christian Dawson, its chief operating officer.
Big Losses for U.S. Tech Firms
According to a new report by the nonprofit New America Foundation, in total NSA spying could slow the growth of the U.S. tech industry by as much as four percent in the short run, though the massive hit to American credibility could have long-range repercussions that are hard to estimate at present. The NSA spying is leading many nations to develop their own, indigenous capabilities that suggest fewer opportunities for American tech firms into the future. For example, Brazil and India are planning domestic IT companies that will keep their data centers within national boundaries and thus hopefully out of NSA’s reach. Greece, Brunei, and Vietnam have announced similar plans.
The point really stings: cloud storage services are already a $150 billion industry, a number expected only to grow. The question now is how much of that growth for American companies will be siphoned off by foreign competition because of the NSA’s wholesale spying. One-third of Canadian businesses said in a survey they were moving their data outside the U.S. as a result of NSA spying. Artmotion, a Swiss web hosting provider reported that within a month after the first revelations of NSA spying, business jumped 45 percent.
You’re an American Company? No, Thanks
“We’re not an American company” may prove to be a decisive sales point, and the NSA activities a persuasive marketing tool. The point is not theoretical. “Ties revealed between foreign intelligence agencies and firms in the wake of the U.S. National Security Agency affair show that the German government needs a very high level of security for its critical networks,” Germany’s Interior Ministry said in a statement about the canceled Verizon contract.
While the NSA likely is even now working on ways to break into foreign data centers, the immediate concern for many governments abroad is the “sharing” agreements NSA enjoys with American firms. As revealed by Edward Snowden, most American tech companies are required by the U.S. government to make themselves open to the NSA, either by directly sharing data (for example, Verizon) prepackaged to NSA needs, or by allowing the NSA to dictate what technological back doors will be built into the actual hardware (Cisco.) Either way, in the minds of many foreign governments, purchasing goods or services from an American company is the equivalent of exposing by default all data that passes through those goods or services to the American government.
“I can’t imagine foreign buyers trusting American products,” said security expert Bruce Schneier. “We have to assume companies have been co-opted, wittingly or unwittingly. If you were a company in Sweden, are you really going to want to buy American products?”
Corrupting the Entire Internet
The New America report also explains that the NSA has fundamentally attacked the basic security of the Internet by undermining essential encryption tools and standards, inserting backdoors into widely-used computer hardware and software products, stockpiling vulnerabilities (“zero day defects”) in commercial software rather than making sure those security flaws get fixed, dropping spyware into routers around the world, impersonating popular sites like Facebook and LinkedIn to gather data, and hacking into Google and Yahoo’s backbone data links to harvest emails, address books and more.
This all in spite of one of the core missions of the NSA being to protect America’s cybersecurity.
A Wake Up Call?
The cynical might say that with the loss of business revenues abroad, the American government finally has a reason to reign in the NSA, at least overseas. Tech companies, after all, are traditionally big political donors, especially to the Democrats and thus hold some clout. Domestically, there is little financial incentive for less spying; remember, the only person on earth Obama has personally and specifically assured is not being monitored via her cell phone is a foreigner, German Chancellor Angela Merkel. No, sorry, Americans are still fair game.
Perhaps the worst news for American tech is hardest to quantify. “It’s not possible to put an exact dollar figure on the cost of lost business for U.S. companies as a result of the NSA revelations,” said Chris Hopfensperger, policy director for BSA/The Software Alliance, a Washington-based trade association. “If a customer goes directly to a non-U.S provider for something, you never know that you didn’t get the call.”
Funny, because while the American company may indeed never know they didn’t get the call, the NSA might. Who could have thought the wake up call to U.S. firms would be so ironic?
Image by Bruce Sterling under Creative Commons license