European cloud providers think the U.S. spy scandal will result in more enterprises choosing local alternatives over the likes of Amazon Web Services and Rackspace, which, on the other hand, are adamant that they aren't taking part in programs such as Prism.

The debate over U.S. access to cloud data that the Patriot Act helped fuel has once again become a hot topic in the wake of revelations about surveillance programs such as Prism, under which the U.S. government is said to have access to data on servers supplied by Google, Facebook, Microsoft, Yahoo, Apple, and Skype.

"I think it will be really damaging for U.S. companies in terms of competing abroad. It is not something we have played up when marketing our services, but it is a fact that customers are going to discriminate," said Robert Jenkins, CEO at Swiss company CloudSigma.

Distrustful customers

Generally, the news about Prism and other programs will have a big effect on people's confidence in using the Internet, according to Johan Christenson, CEO at City Network from Sweden.

"There are a lot of customers that come to us because they want to store their data in Sweden. The customers don't know that they have to do that, but they don't want any hassles. There is a small trust factor there," Christenson said.

Christenson used to think that trust issue would go away in three or four years, but what has happened in the last week has set that process back a long time, he said.

CloudSigma and City Network both sell infrastructure-as-a-service. Their U.S. competitors are at this point only issuing brief statements in their own defense.

Amazon and Rackspace are not participating in the Prism program, the two companies each said via email. Last year, Rackspace's corporate counsel Justin Freeman was more open about the situation and said that concerns about data privacy limit the willingness of foreign companies to do business with U.S. firms and threaten to exclude American companies from competing abroad.

Users are split on the issue: "I don't think we are that important to be honest. I think if we were some nuclear or medical company or something like that it would have been different, but the fact that we can tell you when Justin Timberlake is going on tour doesn't matter," said Ian Woodall, project manager and Group IT at Box user XL Video, a British company that provides large-scale video equipment for music concerts and festivals.

Avoiding the cloud?

On the other hand, the Swedish National Courts Administration—a state authority that reports to the government and functions as a service organization for the courts—doesn't use any cloud services at the moment. It has started to classify data to open the door for moving some data to the cloud, but using services from U.S. companies feels like a big step, at the moment, according to CIO Magnus Petzäll.

"What has been revealed in the U.S. does have an effect on how we think, and in upcoming procurements of services we will have to be even clearer when it comes to our points of view and demands on security," Petzäll said.

"I can understand people's sensitivity towards this, but I do think they need to be realistic about it," said David Bradshaw, IDC research manager for public cloud in Europe.

In many European countries, security agencies don't have to go to a court to get access to cloud data. If companies thought about that, they would be a little less concerned about using U.S. cloud providers, according to Bradshaw.

That cloud providers are jockeying for position doesn't come as surprise. The customer base is growing strongly and demand isn't going to let up, Bradshaw said. That trend is underlined by a rapid build out of data centers in Europe. In May, Salesforce.com announced plans to build a data center in the U.K. that will go online in 2014.

The local angle will in some cases give European vendors an edge. But they will still have to match Amazon's pricing and SLAs, or better them, Bradshaw said. Microsoft has already gone down that route by committing to match Amazon's prices for commodity services such as computing, storage and bandwidth. Also, the E.U. sees the uptake of hosted services as a competitive issue for European organizations.

"It sees U.S. organizations getting the economic and flexibility advantages and Europe falling behind a bit on exploiting that capability," Bradshaw said.