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IT industries set to lose billions because of privacy concerns

  |   Dec. 17, 2013 at 9:20 PM
WASHINGTON, Dec. 17 (UPI) -- Information technology companies stand to lose billions of dollars of business because of concerns their services are neither secure nor private, U.S. advocacy groups for the industry say.

The Information Technology and Innovation Foundation, an independent think tank and representative body based in Washington, says U.S. cloud computing providers are especially exposed to the risk of losing business, not only within the United States but also abroad.

In a report the foundation estimated declining revenues of U.S. IT companies specializing in cloud computing and data storage could set them back by at least $35 billion over the next three years.

Forrester Research analyst James Staten said the actual losses could be much higher. He calculated technology industry losses could hit $180 billion by 2016 unless more is done to restore confidence in privacy and security of data handled by U.S. technology companies.

IT companies have been raising voices over perceived damage to their business reputation since U.S. secrets leaker Edward Snowden's revelations of National Security Agency activities. An earlier report by Forrester Research said findings and predictions by the Information Technology and Innovation Foundation were too low and losses could run into the tens of billions.

Forrester analyst James Staten said the controversy over NSA spying had focused attention on the agency's data-collecting activities, but a growing corporate distrust of spying agencies across the globe meant more firms would take their business elsewhere or as far away as possible from national jurisdictions.

"European Union rules require data about EU citizens be stored and retained in the EU," he said.

U.S. corporations are subject to similar rules under the Patriot Act, so seeking an EU-based cloud provider or non-cloud IT provider would be a prudent tactic for a U.S. business as well, Staten added.

As businesses move away from traditional hosts of their data, markets will be lost and customers lured elsewhere.

U.S. customers would bypass U.S. cloud providers for their international and overseas business, moves that could translate into up to 20 percent of business losses.

Eight U.S. IT giants -- AOL, Apple, Facebook, Google, LinkedIn, Microsoft, Twitter and Yahoo -- this month launched a public campaign against NSA surveillance, arguing it was bad for their business.

California's Silicon Valley, where much of the U.S. IT business is located, "has to cut off campaign contributions to politicians who don't get it," San Jose Mercury News said in a Dec. 13 editorial.

"That means you, President [Barack] Obama," the newspaper said on its website. "And you, Sen. Dianne Feinstein [D-Calif.]." Both are standing firm on the "NSA's right to break into anything anywhere under the umbrella of fighting terrorism," the newspaper said.

"At a minimum, the president fails to understand the urgency of resolving this crisis. He promised last week to propose reforms to restore Americans' trust in intelligence agencies -- but he made the same promise six months ago at a press conference in San Jose."

The Mercury News cited industry concerns that more needs to be done by Congress to resolve the issue of indiscriminate spying and noted lawmakers' recent efforts to limit the activity to only those "Americans suspected of being a security threat."

"It's a start, but it won't restore trust in U.S. technology products," the editorial stated.

The Mercury News said: "Tech companies may not be using data in a nefarious way. Maybe the NSA isn't, either. That's not the point. When Americans turn on their smartphones, laptops and tablets, they should know the extent to which both the government and private companies are tracking their activity. And they should know how the information is being used."

Industry analysts also cited potential loss of business for U.S. companies as other countries take steps to bypass the United States altogether in international telecommunications. Brazil has announced plans to set up telecom links bypassing North America. Snowden has applied to Brazil for asylum once his present arrangement with Russia ends in August.

© 2013 United Press International, Inc. All Rights Reserved. Any reproduction, republication, redistribution and/or modification of any UPI content is expressly prohibited without UPI's prior written consent.
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