PRISM could cost US cloud firms $35bn but benefit European providers

The PRISM revelations and the National Security Agency's programme of obtaining data from web firms could cost the American cloud computing industry $35bn (£23bn) over the next three years, as wary customers switch to providers that store data outside the US.

That's according to figures from the Information Technology & Innovation Foundation in its report, How Much will PRISM cost the U.S. Cloud Computing Industry? It marks the first attempt to calculate the cost of the information leaked by Edward Snowden, and it suggests European firms are set to benefit as customers lose trust in American cloud providers such as Google, Microsoft and Amazon.

In the worst case scenario for US firms, the report suggests they're likely to lose $35bn by 2016, if 20 per cent of current clients switch to an overseas provider. Even in the best case scenario of American cloud providers losing just 10 per cent of their business to foreign competitors, they're still set to lose almost $23bn (£15bn). The figures take into account the fact that cloud is a fast growing element of the IT industry.

"The impact of PRISM on US companies may be particularly acute because cloud computing is a rapidly growing industry," read the report.

"This means that cloud computing vendors not only have to retain existing customers, they must actively recruit new customers to retain market share. Global spending on cloud computing is expected to grow by as much as 100 per cent between 2012 and 2016, whereas the global IT market will only grow by three per cent," it continued, adding customers deserting America will have negative impacts in the long run.

"If US companies lose market share in the short term, this will have long-term implications on their competitive advantage in this new industry."

The report is based on a survey that found that 10 per cent of respondents outside the US had cancelled a cloud project with an American firm because of PRISM, while 56 per cent said they're less likely to use a provider based in the US.

The Information Technology & Innovation Foundation also points out that some countries are already benefiting, especially Switzerland, which being outside the European Union isn't bound by treaties. The report says the largest Swiss cloud provider reported a 45 per cent increase in revenue the month following Snowden's NSA revelations.

"Many of the economic benefits of cloud computing, such as job growth and revenue, are dependent on the United States being able to export cloud computing services," it said.

"If US firms are to maintain their lead in the market, they must be able to compete in the global market. It is clear that if the US government continues to impede US cloud computing providers, other nations are more than willing to step in to grow their own industries at the expense of US businesses," the report added.