Forrester– NSA Spying’s Impact on Cloud was ‘Overblown’

Worries about how the PRISM surveillance scandal would affect the profits of US-based cloud service providers (CSPs) were overblown, according to a new report from Forrester Research.

In the months following Edward Snowden’s revelation of the US National Security Agency’s spying program PRISM, many analysts, including those at Forrester, predicted major fallout for US-based cloud services in the international market.

In August of 2013, two months after Snowden’s revelations, Forrester said that the impact of the scandal could amount to a $180bn dip in sales, a 25% hit to overall IT service provider revenues in that timeframe.

Now Forrester has returned to see how US-based firms have fared abroad in the years following the PRISM scandal. So, did PRISM cause CIOs abroad to flee? Yes, but not nearly as much as was predicted.

Forrester asked 1,668 business technology decision makers in non-US locations the following question: “In the past year, has your company explicitly halted or reduced your spending with US-based companies for Internet-based services (e.g., cloud, online service/outsourcing) due to these security concerns?” 26 percent of respondents answered yes.

That would put the impact in the range of Forrester’s previous predictions, but when Forrester followed up with the 427 respondents who answered affirmatively, they found that only 34 percent stopped service due to “fear of the intelligence community spying.” That means about nine percent of foreign businesses have dropped US CSPs due to the fallout from PRISM.

That’s a significant number, but it’s far lower than some predictions.

“Prism’s impact is still felt in the market for internet services, although the eye of the storm and its resultant impact is smaller than was originally thought,” said Forrester analyst Edward Ferrara in a blog post. “In this first survey of international customers, the data suggests such concerns about Prism were overblown.”