Mumbai: The US cloud computing industry stands to lose $22-35 billion over the next three years if foreign customers decide that the risks of storing data with a US company outweigh the benefits following recent revelations about the electronic surveillance programmes of the National Security Agency (NSA), according to a new report by the Information Technology and Innovation Foundation (ITIF).
“Many foreign customers are now deciding whether the risks of storing data with a US company are worth the benefits, and foreign cloud service providers will ruthlessly exploit this perceived weakness to gain market share,” said Daniel Castro, a senior analyst with ITIF and author of the report that was released on 5 August.
The US has been monitoring communications between US and foreign nationals over the Internet for years under a project called PRISM, and around 6.3 billion reports were collected from India, according to an 8 June report by The Guardian, a UK newspaper.
The US, noted the report, is the international leader in cloud computing, dominating every segment of the nearly $130 billion industry. Of the $13.5 billion in investments that cloud computing service providers made in 2011, $5.6 billion came from companies outside North America, according to research firm Informa Telecoms and Media.
While the data are still coming in, making any estimate preliminary, Castro said the combination of factors could cost the US 10-20% of the foreign cloud market by 2016, when the industry is expected to pass $200 billion worldwide.
Cloud computing, a technology that delivers software services over a network such as the Internet, developed out of efforts by large web-based companies to capitalize on the use of their large-scale data centre capacities.
As such, the initial centres were largely concentrated in the US—particularly Texas, California, Oregon, Washington, and Virginia—in areas where land, electricity, taxes and other overhead costs made operating the centres relatively cheap, according to an August 2012 study by the Confederation of Indian Industry (CII), along with KPMG and Amarchand Mangaldas.
Most cloud-specific data centres continue to be concentrated in North America and Europe, with some recent expansion into East Asia (especially Singapore). There are about 36 privately owned data centres available in India, which puts it on par with Italy (33) and Switzerland (36) but far behind other developed countries such as the UK (144), Germany (127) and France (96), the report noted, adding the US “is the clear industry leader with well over 1,000 servers listed”.
A survey by the Cloud Security Alliance revealed that 10% of foreign respondents had cancelled a project with an American-based cloud computing provider following the PRISM revelations.
German data protection authorities, for instance, have called for suspending all data transfers to US companies. Research firm Gartner estimates that in western Europe alone the cloud computing market will be $47 billion by 2015. While much of this projected growth was until recently up for grabs by US companies, the disclosures of the NSA’s electronic surveillance may fundamentally alter the market dynamics, said the ITIF report.
“Given that the Indian government too has the power to monitor data (for instance, with the help of the Central Monitoring System or CMS), it is unlikely that there will be any dramatic shift in the cloud computing market,” said Alok Shende, principal analyst at Ascentius Consulting. He added, however, that monitoring will surely make companies increasingly choose private clouds (with the data hosted on the company’s premises, rather than on public clouds).
According to a 7 October Gartner report, the public cloud services market in India was forecast to grow 32.4% in 2012 to a total $326.2 million. A study by research firm IDC for EMC India Pvt. Ltd concluded that cloud computing in India would be a $4.5 billion market by 2015.