NSA spying fuels EU concerns about U.S.-based cloud services

The fallout from the National Security Agency’s secret surveillance programs unmasked last month is spreading to companies such as Amazon, Rackspace and SoftLayer.

The U.S.-based cloud-computing providers stand to lose out on billions of dollars if they can’t assure European companies that their data are free from the federal government’s prying eyes, the European Union’s digital chief said this week.

Lacking assurances, European Commission Vice President Neelie Kroes warned that the EU may adopt stringent laws governing the storage of Europeans’ data. European consumer protections have forced tech giants such as Google and Microsoft to change their business practices in the past.

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“Why would you pay someone else to hold your commercial or other secrets if you suspect or know they are being shared against your wishes?” Kroes said after a European Cloud Partnership Board meeting Thursday. “Front or backdoor, it doesn’t matter. Any smart person doesn’t want the information shared at all. Customers will act rationally, and providers will miss out on a great opportunity.”

Cloud computing involves storing programs and records on someone else’s computers off-site instead of computers at a company’s site. It’s typically more cost-effective and also more efficient because the apps and data often can be accessed from any Internet-connected computer in the world.

Last year, the EU began a program advocating greater cloud-computing usage. If policy objectives such as guaranteeing more data security are met, spending on cloud services could grow to $100 billion by 2010 in the EU.

Kroes acknowledged this week the growing calls to incubate more European-based cloud providers and to create an EU-wide cloud network. But establishing a 28-country standard won’t be easy.

For now, most cloud storage offerings come from the U.S. and that domination is a major concern for organizations overseas, said David Linthicum, senior vice president at consulting firm Cloud Technology Partners.

“The NSA scandal has had a chilling effect in Europe,” he said. “They’re worried about their resources being controlled by someone else.”

David Tollen, a San Francisco attorney who works on cloud contracts, said the rising tensions could lead to sweeping changes if EU companies are able to demonstrate they have better data security.

“Many Americans will even want their data to be in companies in Europe then,” Tollen said. “That could lead Silicon Valley companies to D.C., asking for legislation that creates a perception of safety in the American sphere.”

Kroes suggested that requests to look into a company’s storage should be part of a transparent process, as opposed to the secret court orders brought to light by former NSA contractor Edward Snowden’s leaks.

Several cloud providers did not immediately respond to requests for comment.

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