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Crisis of Confidence in Western Tech Firms to Shift Momentum to the Emerging East

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Revelations in June 2013 regarding the cooperation of major Western technology companies with state apparatus in obtaining user information may have a long-term impact on consumer purchasing decisions in the global telecom sector and boost emerging market firms in the east, especially China and South Korea. The leak by whistle-blower Edward Snowden has transformed the previously assumed notion that private sector tech firms can act independently of governments, forcing consumers to be more protective of their information online, especially in the cloud computing and social media segments. However, enforced transparency may also lead to improved global regulations that define state capabilities and the data protection that consumers and businesses are afforded.

Global Consumer Expenditure on Telecom Services and Equipment: 2007-2020

Source: Euromonitor International from national statistics/Eurostat/UN/OECD

Note: 2013-2020 figures are forecast; figures in US$ constant terms

Privacy-Conscious Consumers to Switch Demand Focus to Emerging Brands

The era of global dominance of Western multinational information and communications technology (ICT) brands, such as Facebook, Google and Microsoft, in everything spanning from cloud computing to servers could take a hit following revelations the companies have been cooperating with the US National Security Agency in the secret data-collection PRISM programme. Data-conscious end-users and client businesses will begin to evaluate their exposure to US espionage.

As global consumer expenditure on telecom services broke the US$1.1 trillion barrier for the first time in 2012, US tech giants have been the spearhead of growing telecom consumption, especially through social networks Facebook and LinkedIn, email services from Google and Yahoo, hardware from Apple and software from Microsoft. However, Chinese ICT firms, which were ironically condemned by the US authorities for furthering Chinese intelligence interests in early 2013, are making rapid headway on the global stage, while South Korean, Russian and other emerging technology brands are increasingly challenging the status quo. South Korea’s Samsung has already edged ahead of Apple as the world’s most profitable developer of mobile phones according to 2013 Q2 fiscal results from trade sources. The public exposure of US state access to private user data will only serve to push more consumers to non-US brands, while emerging market start-ups will have the confidence to challenge the tarnished global giants.

Alternative Emerging Market Cloud Providers Likely to See Reinvigorated Demand in Europe

The profile of US cloud solutions firms had been under intense scrutiny in European markets even before the data leak, with regional governments questioning the exposure of such firms to US data-access laws, such as the Patriot Act. On the back of the PRISM revelations, the lucrative Western European market, where a high 95.9% of businesses used the Internet in 2012, is likely to turn to alternative providers for its cloud solutions, especially from Asia. Meanwhile, in markets where Western social media brands lag behind domestic social networking leaders, such as in China and Russia, the gap is likely to expand further.

Forced Transparency to Help Define Data-Access Standards

Although the loss of credibility for Western tech majors will likely damage the utopian image of Silicon Valley innovation, the shifting of the private-public information-sharing debate into the mass media will help define this uneasy relationship, potentially providing clear consumer privacy regulations in segments such as cloud and social media. The global businesses environment, which continues to be held back by IT-related data security concerns, would certainly benefit. Demand for telecom services, meanwhile, will continue its rapid growth uninterrupted, with global consumer spending set to rise by 34.3% in real terms over 2013-2020.

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