No matter where you think he falls on the spectrum between patriot/hero and villain/traitor, Edward Snowden’s whistle-blowing is expected to cost U.S. companies as much as $35 billion in lost revenues through 2016. The mistrust left in the aftermath of his disclosures, while difficult to gauge, has been estimated at or around $35 billion by the according to the Information Technology & Innovation Foundation, a policy research group in Washington whose board includes representatives of companies such as Intel and IBM.
“The potential fallout is pretty huge given how much our economy depends on the information economy for its growth,” said Rebecca MacKinnon to Bloomberg recently. MacKinnon is a senior fellow at the New America Foundation, a Washington policy group. “It’s increasingly where the U.S. advantage lies.”
ValueWalk's Raul Panganiban interviews Kirk Du Plessis, Founder and CEO of Option Alpha, and discuss Option Alpha and his general approach to investing. Q1 2021 hedge fund letters, conferences and more The following is a computer generated transcript and may contain some errors. Interview with Option Alpha's Kirk Du Plessis
Time to close the Internet?
Somewhat ironically, the U.S. is pushing an open internet agenda, yet, Snowden’s disclosures have a number of countries looking to close the internet as a result revelations that continue to come to light each week.
The spying revelations have led governments around the world to consider “proposals that would limit the free flow of information,” said Richard Salgado, Google’s director for law enforcement and information security before a Senate panel two week ago. “This could have severe unintended consequences, such as a reduction in data security, increased cost, decreased competitiveness, and harm to consumers.”
Both China and Russia are weighing measures that would add to governmental controls on the Internet in their countries. Emerging markets such as Mexico, and South Korea which present huge revenue opportunities to U.S. tech firms, may also limit their purchases in lieu of the (ongoing) spy scandal. Whether Cisco is working with the NSA has yet to be determined, however, the second-guessing of Cisco products and services is ongoing and the company may be banned in China given the Snowden affair.
The recent revelations that the NSA was spying on German chancellor Angela Merkel has had a direct impact on companies like Akamai Technologies Inc whom have already witnessed the backlash first hand.
“It’s clearly bad for American companies,” Akamai’s CEO TomLeighton said Nov. 20 at “The Year Ahead: 2014,” a two-day conference in Chicago hosted by Bloomberg LP. “It’s particularly bad now in Germany, where it’s really being played up, to whip up anti-American corporate sentiment. We’ll probably lose some business there.”
Effect on cloud computing companies
Cloud computing will also be hurt given the NSA’s spy program. According to the Information Technology & Innovation Foundation, cloud computing is expected to reach $207 billion by 2016. In a survey by the Cloud Security Alliance, the group found that 10% of non-U.S. customers have cancelled contracts with U.S. companies since the Snowden story broke in May. Additionally, 56% of those surveyed said they would be less likely to work with a U.S. based cloud company in the future.
“People aren’t going to trust the U.S. and U.S. companies as much,” Jason Healey, director of the Cyber Statecraft Initiative at the Atlantic Council, a Washington-based policy group told Bloomberg. “You’re going to see national boundaries begin in cyberspace.”
Following the revelations that the NSA was listening in on Brazilian president Rousseff and her top aides, Bloomberg reports that Brazil is considering measures that would force companies like Google to host data in Brazil for Brazil. Germany is considering similar legislation.“The private sector is very worried about this because it messes with what might be most economic way to route message flows and traffic,” said Gene Kimmelman, project director for human rights and Internet policy at the New America Foundation, a Washington policy group in another interview with Bloomberg. “If you’re forced to have equipment in a certain country, by law, it might add significant expense to an operation.”
While it may be easy to dismiss the Snowden affair with, “Of course the NSA is spying on you,” the sectors mentioned aren’t allowed that sort of cavalier attitude.
Tip of the hat to Nicole Gaouette whose reporting made this piece possible.