Will the NSA's activities handicap IT in the United States?

NSA spying has given U.S. IT a black eye, possibly triggered a recession in its tech industry, and fueled data protectionist movements.


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."

By Patrick Gray

Patrick Gray works for a leading global professional services firm, where he helps companies rapidly invent and launch new businesses. He is the author of Breakthrough IT: Supercharging Organizational Value through Technology as well as the companio...