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NSA snooping could cost tech companies big bucks

(MoneyWatch) National Security Agency surveillance of Americans' telephone and Internet communications has caused a backlash among many large technology companies that want to disclose more information about the government's data requests.

But there's another reason companies such as Apple (AAPL), Google (GOOG), and Facebook (FB) want off the leash: money. According to public policy think-tank Information Technology & Innovation Foundation (ITIF), cooperating with the NSA's PRISM electronic surveillance program will cost the U.S. cloud computing industry an estimated $35 billion over the next three years and have a lasting impact of the industry's global competitiveness.

According to the ITIF report, although U.S. companies have taken the lead in cloud computing -- an industry that will double in size by 2016, according to estimates by Gartner -- other countries are catching up.

The problem is that as cloud services adoption expands throughout the world, potential corporate and consumer users might be concerned about the prospect of government surveillance of their data, and U.S.-based providers would be seen as legally unable to prevent such action. According to the report, even before public knowledge of the PRISM program, European providers used the 2001 Patriot Act -- which expanded the government's surveillance power -- to stir fear, uncertainty and doubt among potential clients.

ITIF estimates the range of potential damage at $21.5 billion on the low end -- assuming that U.S. providers lose 10 percent of foreign business -- to $35 billion on the high end. The group writes:

The data are still thin -- clearly this is a developing story and perceptions will likely evolve -- but in June and July of 2013, the Cloud Security Alliance surveyed its members, who are industry practitioners, companies, and other cloud computing stakeholders, about their reactions to the NSA leaks. For non-U.S. residents, 10 percent of respondents indicated that they had cancelled a project with a U.S.-based cloud computing provider; 56 percent said that they would be less likely to use a U.S.-based cloud computing service. For U.S. residents, slightly more than a third (36 percent) indicated that the NSA leaks made it more difficult for them to do business outside of the United States.
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