Facebook executives are taking a pounding from angry shareholders over its botched IPO and stagnant share price; IBM is set to confirm the loss of 1,300 jobs; the PC and server markets are continuing their decline; and Windows 8 has only a paltry 5% market share months after going on general release. And those are the ‘not so bad news’ stories of the week.
The two headline-hoggers of the week – the scandal over NSA surveillance of US citizens under the Prism programme and the UK government’s hammering of Google over its accounting practices – will prove to be pivotal turning points politically and commercially for the technology sector. If it’s possible to define a moment as a childhood’s end, this would be a good candidate.
First, there is the ongoing turmoil over technology companies accounting practices. Apple CEO Tim Cook went before a congressional committee in the US a few weeks ago to explain how his company managed to avoid paying the 30% tax on corporate profits applicable under US law. The good optics of a beleagured state bringing Big Business into line were quickly undone as Cook went on the offensive, explaining his company’s structure and advocating for a transparent system that would require everyone to pay a fair share – a system, presumeably – he would be more than happy to support by repatriating some of those hundreds of millions of dollars sitting offshore. Far from coming away from the experience chastened, it was the committee that had to do some soul searching.
Much less sympathetic was the report delivered by a UK parliamentary committee on Google’s tax affairs. The search giant was slammed for its "highly contrived" tax arrangments as was Her Majesty’s Revenue and Customs for allowing a situation where one of tech sector’s best performers away with making a derisory contribution to the economy.
Second is Prism scandal. Last week, former BoozAllen Hamilton employee Edward Snowden blew the whistle on practices that left the personal data of American citizens open to analysis by the National Security Agency (NSA) for use in FBI investigations. That the US government (Democrat or Republican) has a surveillance culture has been ample fodder for talk radio and the entertainment industry since before 9/11 (Sandra Bullock had to deal with it in 1995 in The Net and Will Smith in 1998’s Enemy of the State). Now that we know the programme enabling the intrusion into and analysis of personal data from social network updates to e-mail to telephone calls has a name and the complicity of the tech industry in not preventing or resisting it, users will think twice about supporting the likes of Microsoft, Facebook, Yahoo, Google, and others. The absence of concrete examples that such surveillance thwarted terrorist attacks and saved lives has put the onus on the US government to prove Prism’s validity and ensure the public is aware of how it works. Apparently there is worse news to come. According to House Democrat Laura Sanchez what we know so far is "only the tip of the iceberg" and that Prism’s reach is much wider than we know.
Between tax and privacy issues the tech sector has to accept that its politics of libertarian utopianism will be tempered by commercial and political demands.In the meantime a serious charm offensive is in order to regain user (and advertiser) confidence.The excuse of ‘it’s all legal’ won’t assuage any concerns.
The fun part is what the EU will do to make sure a US problem does not become a European one, as well. One suspects it already is.
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