Specter Haunts American Cloud Companies: The Patriot Act Deters Foreign Business

For a European firm, the specter of the Patriot Act in America’s cloud has haunted UK defense contractor BAE Systems. BAE has jettisoned its idea for implementing Microsoft’s Office 365 cloud based productivity platform. Why? Very pointedly and directly, they suspect that the US government, which will have available at its disposal the platform and the right to go in via the PATRIOT Act, will also have the will to do so; the US government systems can easily access the data…

According to Charles Newhouse, who is head of strategy and design at BAE systems, “"We were going to adopt Office 365 and the lawyers said we could not do it." Newhouse spoke at the Business Cloud Summit 2011 in London.

Perhaps BAE Systems reconsidered the efficacy of the platform after Gordon Frazer’s remarks to ZDNET during the launch of Office 365’s in June of 2011. When Microsoft UK’s managing director was asked whether Microsoft could verify that EU-stored data held in EU based data centers would not leave the European Economic Area regardless of the PATRIOT Act, Frazer was up front. He said that because Microsoft’s headquarters were in the US, they were under US laws.

Of course, Microsoft must abide by the laws in the countries where the subsidiary companies are located, as well. However, if there was a request for data from BAE Systems, under the PATRIOT Act, the data would have to be given. And of course, it is this potential, unlimited US government access under the PATRIOT Act that European businesses object to.

For example 70% of European companies have noted concerns evidenced by BAE systems, according to a recent survey. And how are they counteracting this fear of potential hijacking of data via the PATRIOT Act? They are using it to compete against us. Companies have begun marketing their services as immune to American legislation simply because they do not use the American cloud and platforms that provide access to American cloud computing which is subject to the PATRIOT Act.

What Swedish firm City Network is doing is becoming typical. Their chairman Johan Christenson has said according to reports, “

"We believe that a service owned and operated locally in the EU, and fully compliant with EU data protection laws, will be very attractive for European companies." Then Christenson went on to make an offer when he said, "US companies with European operations will also benefit from the lower latency of a locally hosted solution." Global going local? Well, there are benefits considering what the PATRIOT Act does NOT avail: data freedom

It is appearing more and more that the PATRIOT Act is a two edged sword with an unsuspected fallout. If American freedoms are being curtailed, including the freedom to do business, then European businesses and those in Asia will surely benefit as they offer their unrestricted and unencumbered cloud computing services, super marketing their products against our chained-up American cloud companies.  

German cloud providers are advertising the PATRIOT Act as the reason why companies should select German companies. Ambassador Philip Verveer, US coordinator for International Communications and Information Policy at the State Department, has said that the PATRIOT Act has become a "marketing proposition" for America’s international competitors. It would appear that the President’s attempting to quell the fears of foreign companies against this phenomenon will only encourage them to continue. Why should they end a great marketing advantage?

Will China be far behind? Maybe not if they end the restrictions, as they might be doing to prosper their Cloud Valley. If the US doesn’t clear this problem up, it will be left in the dust and even in technology, then, will be regulation-restricted in its entrepreneurship and innovation, areas where the US has been a standout.