Foreign Firms Flee US Cloud Services

Further proof that the NSA surveillance scandal is impacting the United States IT industry came on Friday with the publication of a study conducted for Canadian Web hosting and cloud services provider Peer1 Hosting.

Fully 64 percent of the 300 UK- and Canada-based respondents to the survey hoped to move data from U.S.-based cloud service providers to their own countries within the next five years, and 51 percent wanted to pick providers in the country where their headquarters were located.

The NSA scandal drove 25 percent of the Canadian respondents to stop storing their data in the U.S.

“We’re lucky if it’s only 25 percent,” Daniel Castro, a senior analyst at the Information Technology & Innovation Foundation, told the E-Commerce Times.

That percentage is likely to grow, Castro predicted.

“Small businesses don’t account for a large part of the market,” he noted, “but on the other hand, they’re more flexible and don’t take six to 12 months to make decisions.”

More About the Survey

There were 300 respondents to the survey, from companies with up to 250 employees. Fifty-one percent of them hosted data in the U.S.

The study was conducted in the fall of 2013. Participants went through a rigorous selection process that verified their size, ensured the respondent was the primary IT decision maker, and confirmed the company had outsourced at least some services to a third party provider “such as Amazon or Rackspace or whatever,” Robert Miggins, Peer1’s senior vice president of business development, told the E-Commerce Times.

Candidates also were screened to ensure they were aware of current laws such the U.S. Patriot Act and the Affordable Care Act, and recent pivotal events such as the partial shutdown of the U.S. government, which occurred around the time of the survey.

What Participants Said

Security was the top concern among the respondents, with 96 percent citing it as a factor in selecting a provider. Performance was next, being cited as a factor by 94 percent.

The data privacy laws of the country where the data will be hosted were a concern for 82 percent of the respondents. Nearly one-third said the recent news about the NSA collecting information on cellphone calls outside U.S. borders would impact their data-hosting decisions.

“We’re finding that companies are in this wait-and-see posture because there’s been a long pause for people to understand what other revelations we’re going to have that we need to be concerned about,” Jim Reavis, executive director and cofounder of the Cloud Security Alliance, told the E-Commerce Times.

“Companies are trying to understand what their long-term position should be,” Reavis continued.

The Pain and the Passion

U.S. IT executives have met with president Obama and members of his administration to urge restrictions on the NSA’s surveillance activities several times, the most recent meeting taking place in December.

Customers — especially overseas — have been moving away from American-made technology in the wake of leaks about the NSA’s activities, according to Cisco.

A report on NSA surveillance activities , commissioned by the Obama administration and made public in December, excoriated the agency and recommended overhauling both it and the U.S. Foreign Intelligence Surveillance Court, which oversees it.

The president reportedly is considering reining in the NSA’s activities, possibly as early as this week, but “everything the administration is considering is small tweaks, and these aren’t going to change the hearts and minds of people making tech buying decisions,” ITIF’s Castro suggested. “We need some real reform.”