Survey: NSA Scandal Prompting Shift Away From U.S. Providers

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About 25 percent of UK and Canadian businesses say they are looking to move data outside of the United States because of revelations about NSA surveillance, according to a survey by Peer 1.

Since the NSA privacy scandals broke eight months ago, there’s been plenty of speculation about how the revelations might impact U.S. hosting providers. Forrester made the bold prediction that the cloud market would take a $180 billion hit over the next three years as a result of new privacy concerns.

Peer 1 Hosting has conducted a survey of actual IT decision makers in Canada and the UK, and the results reflect the nuances of the situation. About 25 percent of UK and Canadian businesses say they are looking to move data outside of the United States following the scandals. But the concerns are not new: 81 percent of these IT decision makers said that the reports of NSA surveillance scandal didn’t surprise them.

Many decision makers outside the United States have been wary of housing their data within U.S. borders ever since the passage of the Patriot Act, which leaves any U.S.-hosted data open to disclosure should the government request it. The NSA privacy scandal headlines might begin to exacerbate that problem.

The Peer 1 study indicates the NSA scandal continues to hurt general perceptions of both hosting providers and cloud services. Sixty nine percent of decision makers said the NSA scandal has made them more skeptical about hosting providers in general, while  57 percent said they are less likely to use a public cloud as a result. The “outsourcing world” (a  generic term for all things hosted off-premises) has grown by leaps and bounds, especially with the advent of the cloud. Negative headlines only serve to continue to hurt the industry.

But it’s not a simple calculation. About 96 percent of these businesses consider security a top concern, while 82 percent cite data privacy as a factor in choosing where to host their data. More than 81 percent said it’s important to know precisely where their data is stored. However, the States remain one of the most popular places for these companies to host data, outside of their own countries.

Confusion About Privacy Laws

As a hosting provider with major operations in Canada, the United States and the UK, Peer 1 has an interesting vantage point on the NSA publicity and how it may shift customers’ focus. Concern about the NSA is highest among Canadian decision makers. A third of Canadian respondents say they are moving their company’s data away from the U.S. as a result of the NSA revelations, significantly more than the 21 percent in the UK.

Significantly, a whopping 69 percent of decision makers said they’d be willing to incur additional latency to ensure data sovereignty.

“With data privacy and security concerns top of mind after NSA, PRISM and other revelations around the world, businesses in the UK and Canada are taking real action,” said Robert Miggins, SVP business development, PEER 1 Hosting. “Many are moving data outside of the U.S., and even more are making security and privacy their top concerns when choosing where to host their company data. It’s clear that hosting and cloud providers need to take note and offer their customers true choice in terms of the locations and environments where they store their data, ensuring they can maintain security, compliance and privacy to the best extent possible.”

The survey also revealed that many don’t fully understand current data laws. While 60 percent said they don’t fully understand current data laws, another 44 percent are confused by privacy and security laws. This confusion only exacerbates the problem from increasing headlines around the scandal. The recent news that the NSA collects information on cell phone calls in the countries of its allies will impact the hosting decisions of a third of those surveyed.

The survey asked 300 Canadian and UK businesses and was performed by March Communications. It should be noted that Peer 1 stands to benefit from these kind of results, as it’s a Canadian hosting provider that operates key space in both Canada and in the UK, in addition to the USA. However, that benefit might be minimal when you consider the potential negative impact that the scandal has on the industry in general. Data and privacy laws are playing an increasing role on hosting decisions. The USA is and remains the most popular hosting destination, and the most popular location for data centers, and not everyone is going to move their data.  It’s safe to say that the majority won’t; however, this scandal should be of concern.

About the Author

Jason Verge is an Editor/Industry Analyst on the Data Center Knowledge team with a strong background in the data center and Web hosting industries. In the past he’s covered all things Internet Infrastructure, including cloud (IaaS, PaaS and SaaS), mass market hosting, managed hosting, enterprise IT spending trends and M&A. He writes about a range of topics at DCK, with an emphasis on cloud hosting.

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One Comment

  1. Jeff

    It's an interesting conclusion since one thing we have learned about the way the NSA operates is that they have no trouble getting data from international providers, they simply do it by force instead of by coercion. This sort of move has a publicity value but the data is no more safe just because it is outside of US jurisdiction; the only thing that will truly increase data security is properly compartmentalized encryption.