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Snowden Scandal Leading to Seismic Change in Global IT Industry
Snowden Scandal
Snowden Scandal Leading to Seismic Change in Global IT Industry
  • By matthew
  • February 10, 2014, 07:19
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Edward Snowden, the former US National Security Agency contractor who disclosed thousands of documents to several media outlets before seeking asylum in Russia.
Edward Snowden, the former US National Security Agency contractor who disclosed thousands of documents to several media outlets before seeking asylum in Russia.


Edward Snowden, who exposed the indiscriminate information gathering by the National Security Agency (NSA) of the United States, employed a cheap and easily-available program to get access to the confidential information of the NSA. 

The New York Times reported on Feb. 8 (local time) that he used web crawler software during his working hours at the Hawaii office of the agency last year to get 1.7 million sets of NSA data. The software he used is similar to the Googlebot, Google’s information collection software, and is characterized by automatically collecting and copying information while moving from websites to websites along links. “It does not seem that Snowden manually gathered that much information sitting at his desk,” the article read, adding, “The collection was performed automatically.”

Controversy has stirred up across the world since the exposure about the large-scale information gathering following the disclosure of the fact of wiretapping by the NSA back in June last year. Under the circumstances, the European Union is looking to block AT&T from taking over Vodafone, and the Indian government has recently canceled its contract with Google for voter register update for the general election in May. China has launched antitrust investigations against InterDigital and Qualcomm, too. 

Since the disclosure by Snowden, US IT giants have been suffering from declining overseas sales and government probes. Their hegemony in the global IT industry is expected to be threatened significantly if governments in Europe, Asia, and Latin America begin to establish information management infrastructure on their own to prevent data leakage in earnest. 

According to the Cloud Security Alliance (CSA), non-US companies have canceled 10% of their contracts with US cloud computing service providers since the outbreak of the scandal. US IT companies’ losses are estimated at approximately US$35 billion for three years to come as well. 

This is because European and Asian countries are unwilling to purchase their products due to the fact that US companies such as Google and Microsoft have handed over their customer data to the NSA. IBM’s sales in China fell 22% in the third quarter of 2013, to drag down the total sales by 4.1%. The turnover is estimated to have dropped 3.7% in the following quarter, too. 

Cisco Systems’ sales in China are expected to have dropped by about 10% year-on-year between November 2013 and January 2014. Cisco is having difficulties finding its way into the government procurement market of Germany as well, with the eavesdropping on Prime Minister Angela Merkel resulting in severe animosity. 

The National Development and Reform Commission (NDRC) of China has launched antitrust probes against Qualcomm and InterDigital in response to the United States’ investigation on the alleged spying by Chinese telecom operators like Huawei. “If these companies call upon the investigation to be stopped, they will be under indictment according to the Patriot Act,” said director Scott Kennedy at the Research Center for Chinese Politics and Business, adding, “In short, they are in a quandary.”

The real problem is that the trouble has just begun for US companies. At present, many European countries, Brazil, and Canada are moving to compel the Internet companies to store their personal information on servers within their national borders. The profitability of Google, Yahoo, and the like is sure to deteriorate if the business information of their overseas offices cannot be brought into the US. Servers out of the US signify soaring costs. 

Furthermore, India is planning to drive US-based email accounts out of its government documents, and the German government is going to demand the use of European open-source technologies and the like to block the access of the US intelligence agency. “Do not use US-based Internet firms’ services if you want to be free from concerns over personal information theft,” Interior Minister Hans-Peter Friedrich warned the public.
European countries and China are even trying to come up with their own corporations to counter Google, Amazon, etc. The former are mulling over building their own infrastructure to circumvent monitoring by the US, too. For example, Switzerland is working on a new cloud computing service that is capable of thoroughly protecting personal information. Germany and France are following it, investing more than 100 million euros (US$136 million) each. China has recently decided to invest US$5 billion in its microchip industry to replace products imported from Cisco and the like.