Tags: Edward Snowden | IBM | Global | Tech Dream

Edward Snowden Killed the Global Tech Dream

Edward Snowden Killed the Global Tech Dream

By Wednesday, 04 November 2015 09:56 AM Current | Bio | Archive

“You’ll never go wrong with IBM” was good investing advice fifty years ago, or even ten years ago. The story is different now. Big Blue can’t keep up in a cloud-based world.

International Business Machines is not the only U.S. tech giant caught in the trap, but the “international” part of its name makes IBM uniquely vulnerable. The company thought it could grow by storing, processing and transporting data between hemispheres.

IBM had a good plan. It might even have worked, had Edward Snowden not come along.
Snowden single-handedly changed the global economy. He exposed the U.S. government’s “collect it all” intelligence methods and the way technology and telecom companies betrayed their own customers. Less than three years later, we already see major consequences.

The dream of data thriving in a transnational cloud is dead. That can’t happen now. The reason it can’t happen is that no one knows whom to trust. If the National Security Agency doesn’t grab your secrets, hackers working for your competitors (or your enemies) will.

Companies like IBM want to do business everywhere. Turning that nice dream into reality is very difficult when national governments make contradictory demands.

The FBI and NSA want backdoor access to everything American companies store in the cloud. At the same time, officials in Beijing don’t want the American government snooping in their files.

The opposite is also true. The U.S. government and American companies don’t want Chinese spies digging through their data.

How does IBM please both sides? It can’t. The result will be a balkanized cloud.

Governments will only trust homegrown technology companies.

Tech giants are desperately seeking ways around these walls.  IBM, along with Apple and Microsoft, even gave the Chinese government access to its software source code. That’s simply unprecedented. Yet the alternative was to abandon the China market. IBM reluctantly complied.

You can see where this is leading.

The Chinese engineers who got a peek inside American software will get new jobs at Chinese tech companies. They will then reconstruct what they saw, and soon China won’t need IBM anymore.

At best, this only bought a little time. Last month, CEO Gina Rometty announced a 14th consecutive quarter of declining revenues. Sales to the BRIC counties – Brazil, Russia, India and China – dropped 30%.

I am not saying IBM is doomed. It can survive and even thrive as an American company – but that’s all it will be, and U.S. revenues won’t support a stock price at today’s level.

The same is true for many other U.S. tech giants. The worldwide tech industry will fragment into smaller pieces, each doing business mostly within its home country.

The global dreams were nice, but they can’t go on. Wake-up time is coming.

Patrick Watson is an Austin-based financial writer. Follow him on Twitter @PatrickW

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The worldwide tech industry will fragment into smaller pieces, each doing business mostly within its home country.
Edward Snowden, IBM, Global, Tech Dream
Wednesday, 04 November 2015 09:56 AM
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