How the NSA is Prompting International Cloud Expansion

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How the NSA is Prompting International Cloud Expansion

By Rich Tehrani, CEO, Group Editor-in-Chief, TMC  |  February 20, 2014

Technology is an area where the US is a hands-down winner. We have limited competition considering how much of an edge incumbent companies have, and how fast tech refresh cycles are today.

This, however, was the case before the Edward Snowden revelations which have scared the global tech community enough that local cloud growth in many countries has accelerated. This is especially the case as the Information Technology & Innovation Foundation in August said the leaks could cause U.S. cloud providers to lose 10 percent to 20 percent of the foreign market to overseas competitors -- or up to $35 billion in potential sales through 2016

This explains why Amazon will deliver AWS in China this year and it will have to compete with the new Wo-Cloud brand from China Unicom (News - Alert), what they bill as a full service OpenStack solution. One wonders if nationalism will cause Amazon to lose lots of business to the home team. Additionally, Microsoft and IBM (News - Alert) are expanding their offerings in the China cloud market.

In Europe things are dicier as European Parliament is recommending that Europe suspend the Safe Harbor agreement with the U.S. that allows American cloud firms to handle the data of EU citizens. Moreover, Estonian president Hendrik Ilves recently said about the NSA revelations, “This shows that Europe has to do its own thing, its own cloud, its own services, here at a European level, and it is especially important for small countries to do that on a European level, because otherwise the economies of scale will leave us behind" Speaking of Europe, in late December by the European Commission (EC) of the launch of eight contractual Public Private Partnerships (cPPPs) of strategic importance for European industry as part of the EC’s Horizon 2020 initiative.

The partnerships will leverage more than €6 billion (US $8.2 billion) of investments to be allocated through calls for proposals under Horizon 2020, the new EU program for research and innovation. One of the areas will be HPC or a super-powerful cloud which will likely help European tech companies take on US cloud leaders.

At the very least, U.S. cloud providers will have to accelerate their build-out of local clouds on various continents, and perhaps even country by country, which certainly won’t help profitability.

Of course, in addition to worrying more about cloud geography one has to expect a tremendous increase in interest for cloud security solutions. In fact Gartner (News - Alert) says the cloud-based security market will move from $2.1 billion in 2013 all the way to $3.1 billion in 2015.

Infonetics Research looked at cloud security services and saw even more to like. It sees the market growing at a 10.8 percent CAGR all the way till 2015 when it hits $9.2 billion.

2014 will be a good year for local data center builders and equipment providers as cloud companies scramble to build clouds all over the world. From a profitability standpoint, Snowden’s NSA revelations have accelerated a trend which is not really a positive for US cloud companies. The only possible plus is this move will help new local entrants who may force the large players to become better in order to compete.


Edited by Stefania Viscusi
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