Local tech firms spurred by the NSA revelations

The revelations were made by Mr. Edward J. Snowden, the former NSA computer technician who worked on classified projects at an NSA-contracting company (Booz Allen Hamilton). While Mr. Snowden’s target in the leakage might have been the U.S. government, it is unfortunate that the real victims have been American high tech companies. Simply put, other […]

The revelations were made by Mr. Edward J. Snowden, the former NSA computer technician who worked on classified projects at an NSA-contracting company (Booz Allen Hamilton). While Mr. Snowden’s target in the leakage might have been the U.S. government, it is unfortunate that the real victims have been American high tech companies. Simply put, other countries don’t trust them!
Journalist Stephan Dorner, in the 20 August 2014 issue of the Wall Street Journal, writes on the proliferation of so-called “NSA-proof” products and companies across Germany and Switzerland, two countries that are particularly “pissed off” by the spying exercise. The two countries seem intent on getting even in some manner. I am not sure of the extent of counter-intelligence, but it is rumored that German lawmakers have considered legislations that would make it costly or even technically impossible for American tech companies to operate inside their borders. It sounds serous!
The events might have created motives other than privacy protection. “Shutting out American companies means more business for local companies,” Richard A. Clarke, a former White House counterterrorism adviser, said. There are numerous companies that are “seizing the moment.” Dorner suggests that Lavaboom, a German email provider, is a direct reaction to the Snowden revelations. “The company’s name plays on the U.S. encrypted service provider Lavabit, which Mr. Snowden used. Lavabit was forced to close down in August 2013, after being forced to disclose classified documents.” “Our existence was a direct response to the closure of Snowden’s email service Lavabit,” Lavaboom co-founder Bill Franklin was quoted to have said.
More established German tech companies are also cashing in. Heinlein Support, an IT support firm, is offering “German data protection standards worldwide.” The company offers a secure email account for $1.33 a month on Mailbox.org, and is quick to let folks know that its servers are located in Berlin. Posteo, a Berlin-based company is also benefitting from the revelations. The company reportedly doubled the number of its user mailboxes to 18,000 in the month after Mr. Snowden’s revelations, with 70,000 mailboxes as of today. Protonet, a Hamburg-based startup which has built a “Made in Germany” encrypted private cloud solution, was reported to have raised “crowd-funded money so fast that many potential investors didn’t even have a chance to throw money at it.” The company promises 100% data sovereignty.
James Staten, a cloud computing analyst at Forrester who has read clients’ requests for proposals says that American businesses are being left off some requests for proposals from foreign customers that previously would have included them. There are German companies, Mr. Staten said, “explicitly not inviting certain American companies to join.”
Germany and Switzerland are not the only countries that were angered by the NSA spying events. In fact, Brazil appears to be more aggressive and open about its efforts to avenge the spying on their government. For example, in April 2014, Brazil awarded a $4.5 billion contract to the Swedish company Saab for new fighter jets, rather to the American company Boeing, even though Boeing was initially heavily favored to win the contract. The tapping of the personal communications of the Brazilian President, Dilma Rousseff, with the help of U.S. high tech companies, has led Brazil to believe it could not trust a U.S. company.
In February, Brazil and the European Union, which had used American undersea cables for intercontinental communication, decided to build their own cables between Brazil and Portugal, and gave the contract to Brazilian and Spanish companies. It has also been reported that Microsoft has lost Brazil government’s business in the wake of the Snowden revelations.
Analogies have been drawn with the fate of Huawei business in the US market. Huawei, the Chinese ICT company, was forced to abandon major acquisitions and contracts when American lawmakers claimed that the company’s products contained a backdoor for the People’s Liberation Army of China.
Forrester Research, a technology research firm, estimates the losses to American businesses at $180 billion, or 25 percent of industry revenue. The estimate was based on the size of the cloud computing, web hosting and outsourcing markets and the worst-case scenario for damages.
American companies, who have obviously been put on the defensive, are trying very hard to convince their international clients that they could be trusted and they are trying to distant themselves from the U.S. government. Security analysts say American tech companies have collectively spent billions of dollars adding state-of-the-art encryption features to consumer services, like Google search and Microsoft Outlook, and to the cables that link data centers at Google, Yahoo and other companies. For example, IBM said in January that it would spend $1.2 billion to build 15 new data centers, including in London, Hong Kong and Sydney, “to lure foreign customers that are sensitive about the location of their data.” Salesforce.com, the cloud computing company, announced similar plans earlier this year.
American companies are usually the best at what they do, and they tend to be transparent. When local competitors move in, it unclear what quality is going to be delivered. As one expert wonders, “It’s like, ‘Well, the very best vendor to do this is IBM and you didn’t invite them.’ ” I’ll say you might end up with lemon!
The bottom line in this article is that many countries are writing off American high tech companies on account of the Edward Snowden’s NSA Surveillance revelations. American high tech companies, who are usually the best at their game, seem to have been unfairly victimised.