Excepting revelations on NSA spying, 2013 was a good year
for the technology industry, particularly in the United States. Silicon Valley
experienced a strong resurgence on all fronts, with innovative new startups at
the consumer and enterprise level and venture funding and new ideas reminiscent
of the heady dotcom days of the late 1990s. In the corporate sector, after
years of frozen budgets, many companies once again started hiring and spending
money on internal IT, funding initiatives ranging from rudimentary application
modernization to cutting-edge big data to digital marketing initiatives.

Yet despite all the good news, the U.S. government created a
dark cloud on the horizon with revelations of NSA spying activities, which
included harvesting phone records and exploiting common consumer and business
technologies from iPhones to Cisco networking gear. The obvious and somewhat
ironic parallel to this is the U.S. measures that blocked Chinese telecom
manufacturer Huawei from acquiring various U.S. technology companies, citing
concerns that the Chinese government would embed spying technology in Huawei
gear and potentially harming the U.S. economy. While the allegations against
the Chinese and Huawei have not been publically confirmed, we do know that the U.S.
government has done much of the same nefarious activity.

NSA-driven offshoring?

Regardless of one’s opinion of the justification for NSA
spying, it’s clear that these revelations are already affecting the U.S. IT
industry. On the positive side, leaks about NSA spying have triggered a new
focus on security and privacy, with major technology companies scrambling to encrypt
and protect information and inform customers about compliance with government
requests for information. If you’re a security specialist, your phone is likely
ringing more often thanks to the NSA.

In the longer term, however, many IT leaders I’ve spoken
with have expressed grave concerns, especially as other governments react to
NSA revelations by demanding that data related to their citizens be kept on
their soil. These “data protectionist” movements threaten to undo a
decade of data center consolidations garnered through fast and cheap networks
and availability of IT personnel, with the U.S. a prime beneficiary. Whereas
building a large, consolidated data center in the U.S. was once a relatively
easy decision, local data centers or those built in “neutral”
countries are now more attractive, if not legally mandated.

A black eye

More threatening than pushing away jobs and technology is
the reputation damage done to the U.S. IT industry by the NSA. In the past few
years, U.S. IT was often cited as a tool against repressive regimes around the
world, with services like Twitter claiming a role in toppling regimes in the
Middle East. These technologies now come with the caveat that the U.S.
government may be listening, and while the U.S. is arguably one of the more
benevolent world governments, this caveat certainly takes some of the shine off
technologies that were once considered tools for freedom.

The concern, reminiscent of the robotic voice noting, “Your
call may be recorded,” is the equivalent of a massive marketing campaign
promoting non-U.S. technology. Everyone from CEOs to anonymous citizens must
now question whether their data is subject to eavesdropping when it passes
through the U.S. or a piece of U.S.-owned technology equipment. Non-U.S.
companies now advertise their relative security away from the prying eyes of
the NSA as a selling point. Regardless of whether this is a legitimate concern,
the NSA has created the ultimate marketing campaign for non-U.S. technology and
products, right at a time when the economy and IT sector could use a boost.

I have thankfully never been affected by a terrorist
incident and can only imagine the horror of having a loved one violently harmed.
Surely the NSA and those who sanctioned its actions believe they are protecting
people and saving the lives of U.S. and non-U.S. citizens. However, it seems that
little concern was given to the economic “collateral damage”
engendered by the NSA, particularly to an industry that’s cited as the
foundation of future U.S. economic growth.

While discussions of economics may seem trite compared to
saving lives, tens or hundreds of thousands of lost jobs caused by a recession
in the U.S. technology industry is certainly impactful to those same citizens
the government purports to protect, potentially on an even larger scale. It’s
not unrealistic to assume that billions of dollars of IT purchases will be
redirected away from otherwise market-leading U.S. companies in the coming
years, combined with infrastructure investments directed away from the U.S. to
mitigate everything from new non-U.S. governmental regulations to concerns
based on little more than good marketing and suspicion. One can’t help but think
of the WWII quip that “at least [Italian fascist dictator] Mussolini made
the trains run on time” and wonder about the extensive spying that the U.S.
government has sanctioned — and what we’re exchanging for that “security.”