The Impact of the NSA on Hosting

Decision Makers in the UK and Canada

Survey Findings prepared by March CommunicationsJanuary 2014

1

Executive Summary

2

A new independent survey of 300 UK and Canadian businesses, commissioned

by web infrastructure and cloud hosting provider Peer 1 Hosting, reveals that

the NSA scandal has made UK and Canadian businesses wary of

storing data in the U.S. In fact, 25% of businesses are now moving their

data outside the U.S. The top hosting concerns defined by the survey were

security (96%) and data privacy (82%).

At the same time, the U.S. remains the most popular

place for companies to host data, outside of their own countries.

Further, despite companies’ strong reaction to the NSA scandal, many say

that they don’t fully understand current data laws, with 60%

admitting they don’t know as much as they should about data privacy laws.

Similarly, 44% are confused by privacy and security laws.

3

The NSA scandal has led to increased skepticism among CA and UK decision makers (DMs)

This is significantly more than the number of UK DMs who agree (21%).

One-third (33%) of Canadian DMs agree they are moving their company’s data away from the U.S. as a result of the NSA scandal.

Despite the U.S. being the most popular location for Canadian and UK DMs to host data (outside of their own countries), they trust the U.S. far less than they do many other countries.

Nearly seven-out-of-10 (69%) DMs say the NSA scandal has made them more skeptical of hosting providers everywhere.

And 57% say they are less likely to use a public cloud as a result.

4

2

More than three-quarters (77%) would rather host their data in a highly secure, but latent facility than in a facility that guarantees top speeds but is less secure (9%).

“Security of my data” ranks highest amongst all factors considered by DMs when selecting a hosting provider, even over performance.

Data security is of the highest importance for CA and UK DMs

Factors Considered In Order of Importance(Total Sample)

Nearly seven-in-ten (69%) agree:

I’d be willing to incur latency to ensure data sovereignty.

”“ 2Eight-in-ten (81%) say:

it is important to know precisely where their data is

stored.

5

The NSA scandal is affecting many DMs’ overall understanding of security

Six-in-ten (60%) agree:

I do not know as much as I think I should about data security laws where my

company’s data is stored. ”“

Four-in-ten (44%) agree:

Privacy and security laws confuse me. ”“

Nearly one-thirdsay the recent news that the NSA collects information on cell phone calls in the countries of its allies will impact their data hosting decisions.

6

DETAILED FINDINGS

Although not surprised, DMs are now more skeptical

7

Q12. How much do you agree with the following statements? (n=150 UK & 150 CA)

SHOWN: “Top2 Box” (Agree strongly/Somewhat)

* INDICATES STATISTICALLY SIGNIFICANT DIFFERENCE OVER OTHER COUNTRY

21%

45%

52%

59%

69%

67%

83%

33%

44%

61%

61%

69%

71%

80%

27%

44%

57%

60%

69%

69%

81%

I am moving my company’s data away from the U.S. as a result of the NSA surveillance scandal

Privacy and security laws confuse me

The NSA surveillance scandal has made me less likely to use a public cloud for my company’s data storage

I do not know as much as I think I should about data security laws in countries where my company’s data is hosted

I’d be willing to incur latency to ensure data sovereignty

The NSA surveillance scandal has made me more skeptical ofhosting providers everywhere

The NSA surveillance scandal did not surprise me

Total Canada UK

*

96% 94%87%

82%

68%

57%

42%

97% 96%92%

85%79%

63%

46%

95%92%

83%79%

57%51%

38%

Security of my data Performance Overall reputation The data privacylaws of the

countries where mydata will be hosted

Recommendationfrom a trusted

source

Where the datacenters are located

Personalrelationship with

provider

Total Canada UK

8

Privacy laws fairly important relative to

other factors when selecting a provider

Q1. When selecting a hosting provider for your company’s data storage, how important are each of the following factors in mak ing your decision? (n=150 UK & 150 CA)

SHOWN: “Top2 Box” (Extremely/Very Important)

*INDICATES STATISTICALLY SIGNIFICANT DIFFERENCE OVER OTHER COUNTRY

Importance of Factors when Selecting a Hosting Provider

**

*

9

Security trumps latency

Q2.Would you rather… (n=150 UK & 150 CA)

Would you rather…

Host your company’s

data in a highly secure

facility where you may

incur increased latency.

77% 9%Host your company’s

data in a facility that

guarantees ultra-low

latency but may

compromise security.

(Total respondents; percentages the same across all countries)

Don’t know/Unsure: 13%

Four out of five need to know precisely where their data is stored

10Q11. When choosing to outsource your company’s data, how important is it to know precisely in what countries your data is stored? (n=150 UK & 150 CA)

SHOWN: “Top2 Box” (Extremely/Very important)

of both Canadian and UK small business DMs

say it is important to know

81%precisely where their company data is stored.

Nearly one-third believe recent news on ally spying will impact decisions

11

Q14. How much do you anticipate the recent revelation that the NSA has collected the information on cell phone calls in the countries of its allies, including

European countries, and many of those countries’ leaders will impact your data hosting decisions? (n=150 UK & 150 CA)

SHOWN: “Top2 Box” (Extreme impact/Very much an impact)

of both Canadian and UK small business DMs

say the recent news that the NSA collects information on cell phone calls in the countries of its allies

29%will impact their data hosting decisions.

51%48%

42%

8% 6% 5% 4% 3% 2%

65%

13%

82%

6% 7%3% 5% 5% 3%

37%

82%

3%

10%6% 7%

3% 1% 1%

United States UnitedKingdom

Canada Germany TheNetherlands

Switzerland France Mexico Spain

Total Canada UK

12Q3.In which of the following locations, if any, are there servers currently hosting your company’s data? (n=150 UK & 150 CA)

SHOWN: CURRENTLY HOST DATA

Outside of their own countries, U.S. is the most popular location to host data

Location of Current Data Servers

52%

40%36%

7%4% 4% 3% 2% 2%

66%

8%

69%

5% 6% 4% 4% 4% 3%

37%

72%

3%

9%

3% 4%1% 0% 1%

United States UnitedKingdom

Canada Germany TheNetherlands

Switzerland France Mexico Spain

Total Canada UK

13Q4.In which of the following locations, if any, is your company’s third-party hosting provider headquartered? (n=150 UK & 150 CA)

SHOWN: CURRENTLY HOST DATA WITH A PROVIDER BASED HERE

It is also the most popular location for a data provider headquarters

Location of Current Hosting Provider HEADQUARTERS

Canadians much more likely to store in U.S. than UK companies are

14Q9. Prior to the NSA scandal, did your company use servers in the United States to store your data? (n=150 UK & 150 CA)

Yes52%

No42%

Don't know6%

Yes63%

No31%

Don't know5%

Yes41%

No52%

Don't know7%

TOTAL Canada UK

But DMs are hoping to move data to their own countries

54% 54%52%

18% 17% 17%

11%

5% 6%

64%

25%

87%

17%

17% 19%

12%

9% 7%

43%

84%

17%19%

16% 16%11%

2%5%

United States UnitedKingdom

Canada Germany TheNetherlands

Switzerland France Mexico Spain

Total Canada UK

15Q5.In the next 5 years, how likely are you to host your company’s data on servers in the following countries? (n=150 UK & 150 CA)

SHOWN: “Top2 Box” (Extremely/Very likely)

Likely Location of Provider Servers in the Next 5 Years

They also plan to switch to providers headquartered where they are

51% 53% 51%

17% 14%18%

11%6% 7%

60%

23%

85%

16%16%

21%

14%10% 10%

43%

83%

17% 18%13%

15%

7%

1% 3%

United States UnitedKingdom

Canada Germany TheNetherlands

Switzerland France Mexico Spain

Total Canada UK

16Q6.In the next 5 years, how likely are you to host your company’s data with hosting providers headquartered in the following countries? (n=150 UK & 150 CA)

SHOWN: “Top2 Box” (Extremely/Very likely)

Likely Location of Provider HEADQUARTERS in the Next 5 Years

Barely half trust the U.S. as a location to host data

72%66%

61%

56%51% 50%

37%

20%

10%

89%

54%57%

51%

57%

49%

39%

25%

14%

54%

77%

64%60%

45%

51%

35%

15%

5%

Canada UnitedKingdom

Switzerland Germany United States TheNetherlands

France Spain Mexico

Total Canada UK

17Q7. How much do you trust the following countries as locations to host your company’s data? (n=150 UK & 150 CA)

SHOWN: “Top2 Box” (Trust very much/Trust somewhat)

Trust in Countries as Locations to Host Data

Trust in Canada and UK as headquarters is much higher than U.S.

70%66%

57%53% 52%

46%

36%

23%

11%

87%

51%53%

59%

47% 45%

35%

25%

14%

53%

81%

61%

47%

56%

47%

37%

22%

7%

Canada UnitedKingdom

Switzerland United States Germany TheNetherlands

France Spain Mexico

Total Canada UK

18Q8. How much do you trust third-party hosting providers based in the following countries to host your company’s data? (n=150 UK & 150 CA)

SHOWN: “Top2 Box” (Trust very much/Trust somewhat)

Trust in Countries as Locations for Headquarters of Hosting Providers

Quarter of Canadians previously storing in U.S. stopped due to NSA

19

Q10. How much of an impact did the NSA scandal in the U.S. have on your decision to stop using U.S. hosting services to store your data? NOTE:

Asked only to those who used to store data in the U.S. prior to the NSA scandal and currently do not (n=9 UK & 8 CA) *CAUTION: LOW BASE SIZE

SHOWN: “Top2 Box” (Extreme impact/Very much an impact)

of Canadian small business DMs

say the NSA scandal had a big impact on theirdecision to store using U.S. hosting services.

25% 11% UK, 18% total

How has the NSA surveillance scandal affected you?

20Q11. In your own words, describe how the NSA surveillance scandal has affected you in your role as a data storage decision-maker at your company.

[OPEN-ENDED RESPONSE]

“It's very worrying. I would avoid the US totally.”- UK ITDM

“Made me leery of trusting anybody or any country.”- CA ITDM

“To be honest I believe the problem can happen anywhere - it is always a risk and we have to engage and trust.”

- UK ITDM

“We will move our company data out of USA ASAP.” -CA ITDM

“Discouraged me from using US based hosting services due to meta tag survelliance [sic] techniques and the fact that all communication is monitored since I am a foreigner. I cannot trust any US based company for secure communications even though we contract to a US based company.” - CA ITDM

“Not greatly. It may be distasteful, but it was hardly a huge surprise!”

-UK ITDM

“It has made me realise that for privacy I must revert to writing letters by hand or on an old typewriter. I realisenow at the age of 54 that we're far more compromised than we ever realised. It makes me sick and angry and more cynical.” - UK ITDM

“We are moving most of our data storage to Canada and specifically asking them to describe how they intend to protect it from ALL security entities (NSA, CSIS etc.) If a security entity want our data, they should have to ask us for it.” - CA ITDM

“It does not overly worry me - I understand what the main drivers are and the war on terrorism is by far the most important thing.” - UK ITDM

“It confirms that we should only host in the UK and in data centers where we have physical access, the lower costs of hosting in other countries was attractive, this is now not a consideration.” - UK ITDM

Research Methodology

Between November 12 – 18, 2013, Peer 1 Hosting commissioned a 10-minute survey through a third-party vendor, ResearchNow, to be administered to n=300 IT decision-makers at small companies* in the U.K. (n=150) and Canada (n=150) that host any percentage of their data in a third-party facility.

All respondents are at least primary IT decision-makers at their companies, and take a primary role in decisions regarding where their company data is hosted in a geographic sense. They all are “extremely” or “very” familiar with the NSA scandal.

The margin of error of this sample size (300) is +/- 5.6% at a 95% confidence interval.

*Companies with 250 or fewer full-time employees 21