“People won’t use technology they don’t trust," Brad Smith, general counsel and executive VP of legal at Microsoft, said in an ominous statement this week. "Governments have put this trust at risk, and governments need to help restore it.”
That statement was posted to a new website called Reform Government Surveillance, which is part of a new initiative from Microsoft and seven other big tech companies to pressure representatives in Washington to limit government surveillance. The effort, which also included an open letter published in national newspapers, caps off several months of public outbursts from these companies expressing concerns about how their businesses may be impacted by the ongoing controversy over the National Security Agency's surveillance tactics.
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Mark Zuckerberg, Facebook's cofounder and CEO, said in September that user trust in Facebook and other websites had gone down as a result of the NSA news. Google, in a petition filed earlier that month asking for the right to disclose Foreign Intelligence Surveillance Act (FISA) requests, noted that its "reputation and business has been and continues to be harmed by the false or misleading reports in the media." In a similar petition, Yahoo complained that its "inability to respond to news reports has harmed its reputation and has undermined its business not only in the United States but worldwide."
It's rare to see Google, Facebook, Yahoo and Microsoft agree on much of anything, but these and other tech companies are now actively making the case that the NSA scandal may be damaging to their businesses. Just how damaging it may be, however, depends on who you ask.
One source familiar with Yahoo's thinking told Mashable that a big concern is how other countries will react to the NSA revelations. Some countries like Brazil have already considered requiring U.S. companies to set up data centers in the country so that all Brazilian data stays in Brazil. If multiple countries were to follow that model, the source says it would pose a "foundational problem for our business." Another source familiar with Google's thinking echoed that concern, noting that it would be "detrimental" to the Internet and the company.
Both sources also noted that user trust is a major concern, which could cut into how much users engage with their services, but both said there has yet to be any noticeable impact. What's more, they say it will be hard to determine with certainty whether the NSA news is the primary cause of any future downturns in user engagement at home or abroad.
Cisco, on the other hand, went so far as to suggest that the NSA scandal played a role in slowing sales abroad. "I do not think it is a major factor across all of emerging," John Chambers, CEO of Cisco, said during an earnings call in November. "I do think it is a factor however in China." Rob Loyd, the company's president of development and sales, went one further:
I would just add, John, that this issue has caused increasingly customers to pause and another issue for them to evaluate, in all of those complexities that you've already discussed. So it's not having material impact but it's certainly causing people to stop and then rethink decisions and that is I think reflected in our results.
"I think it's one way to couch bad news," Andrew Bartels, an analyst with Forrester, said of companies like Cisco citing the NSA controversy for worse-than-expected revenue outlooks. "There's no direct immediate threat to these companies' revenues from the NSA."
That doesn't mean there won't be any negative impact in the future, just that it's probably still too early to tell. Bartels says it's possible that some of these companies will experience less robust growth abroad in the coming years as a result of the controversy. "[These tech companies] have been able to position themselves as providing better security and better data privacy than other local providers," he says. "That story now has holes in it."
Some groups have already published eye-popping projections for just how big those future losses could be. The Information Technology and Innovation Association, a think tank, projected that the U.S. cloud computing industry in particular could lose as much as $35 billion in sales through 2016 as a result of concerns about the NSA. James Staten, another analyst at Forrester, projected that the number could be even higher: $180 billion. However, Staten said this depends on "the assumption that government spying is more a concern than the business benefits of going cloud," something he thinks is not the case.
Those looking for reason to believe in the worst case scenario need only talk to Peter W. Singer. Singer, a cyber security expert at the Brookings Institution and author of the upcoming book Cybersecurity and Cyberwar: What Everyone Needs to Know, says that he met with one U.S. cloud computing company that lost a "multi-billion dollar contract" in Germany due to "discomfort" over the NSA issue.
Singer argues that U.S. tech companies "could have weathered" the initial revelations from whistleblower Edward Snowden that the NSA collected user data from select services, but not the later leaks which claimed the government tapped into the backbone of the Internet and went so far as to spy on some allies. Now, he believes that U.S. tech companies may be penalized by foreign countries in the same way that Huawei, a Chinese tech company, was essentially blocked from doing business with U.S. companies over allegations that it was complicit in Chinese spying efforts.
"Ironically, the exact same kind of whisper campaigns we did against Chinese firms like Huawei — 'Don't go with them because they will provide backdoors to the Chinese government' — well, guess what?" he said. "That will continue to happen to American tech companies."
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