A few weeks ago, Neelie Kroes, vice president of the European Union for the Digital Agenda, warned that American cloud companies could lose $35 billion because of the NSA spying scandal under the Foreign Intelligence Surveillance Act (FISA):
If European cloud customers cannot trust the United States government or their assurances, then maybe they won't trust US cloud providers either. That is my guess. And if I am right then there are multi-billion euro consequences for American companies.
Later, it was discovered that the NSA has placed servers in Europe to track online communications and Internet browsing of Europeans, with their XKeyscore spying software. Simultaneously the European Commissioner for Competition, Joaquin Almunia, has been asking companies such as Google, Facebook, and Amazon to respect EU's antitrust legislation and privacy laws.
There are significant indications that American cloud providers have been losing European customers for some time. Many of those companies are seeing their customers in Europe move away from their services and choose telecoms and other cloud companies that provide better service, and do not answer to US agencies looking for their customer's data.
But there is a way for American cloud companies such as Google and Amazon to regain some of those customers and new ones in Europe:
Invest in European infrastructure and establish partnerships with local players. Due to the secrecy of American intelligence requests for data, backed by secret FISA courts, no company with foreign (non-US citizen) ownership could be subpoenaed to deliver their customer's data, except by local courts. To obtain such information from European servers, any law enforcement agency would need to work through local courts and obtain the necessary warrants.
Both Google and Amazon already have some servers in Europe, but not enough to cover the needs of all their European customers, and significant amounts of data are replicated in servers in other regions. For instance, although Google operates datacenters in several countries, Amazon has concentrated almost all their European infrastructure in Ireland, making it vulnerable to massive attacks.
My choices for the location of additional servers are Switzerland and Luxembourg. Both countries are members of the European Economic Area, are centrally located, have low corporate taxes, and have strong secrecy legislation. Additionally, they are strongly opposed to collaborate with foreign intelligence services.
Expanding their European infrastructure can help cloud providers with the concerns expressed by several European countries about the way they use several legal schemes to avoid paying European taxes.
The European Commission wants companies to embrace cloud computing and create a true European market for those services. If the American cloud providers want to participate in this potential business, they need to focus on optimizing and expanding their offerings in the old continent.