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Cloudy skies for US-based hosting companies ahead of PRISM scandal

Businesses poised to take their data elsewhere to protect it from Big Brother

A couple things happened after Edward Snowden blew the lid off of the NSA’s secrets surveillance program PRISM. First off, sales of the George Orwell’s classic novel about a shadow government that keeps constant watch over its citizens, 1984, shot up 5000 percent.  At the same time and with almost the same ferocity, anxiety over “cloud” storage and applications rose.

The “Snowden effect,” as it’s been dubbed, could have dire implications on cloud providers as companies take their information back in-house to escape the prying eyes of PRISM.  Since U.S. cloud storage companies could have some legal obligation to divulge client information if prompted by the government, increasingly companies are leaving for internationally based cloud storage providers.

In a survey by The Cloud Survey Alliance (CSA), 56 percent of non-US responders said they would be less likely to use US-based cloud providers following information about NSA surveillance programs. 86 percent of all responders in the survey said that the Patriot Act should be modified or repealed altogether to prevent abuses of information gathering.

In August, The Information Technology & Innovation Foundation (ITIF) published figures indicating a predicted loss of $35 billion dollars as a direct result of the NSA scandal. Going one step further, Forrester Research Group’s James Staten argued in a blog post that the figure quoted by ITIF was conservative.

“We think this estimate is too low and could be as high as $180 billion or a 25 percent hit to overall IT service provider revenues in that same timeframe. That is, if you believe the assumption that government spying is more a concern than the business benefits of going cloud,” Staten said in the blog post.

Brad Garlinghouse, CEO of file-sharing service Hightail Inc., in an interview with the Wall Street Journal this week said, “There is no doubt there is a Snowden effect. Security has always been a paramount concern, and given what happened 10 weeks ago, it is that much more acute today.”

With information about PRISM still relatively light it’s not surprising that users and companies have become suspicious of storing and accessing their sensitive information in the cloud. 

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