NSA Internet Spying Sparks Race to Create Offshore Havens for Data Privacy
...Three of Germany's largest email providers, including partly state-owned Deutsche Telekom AG, DTE.XE -0.28% teamed up to offer a new service, Email Made in Germany. The companies promise that by encrypting email through German servers and hewing to the country's strict privacy laws, U.S. authorities won't easily be able to pry inside. More than a hundred thousand Germans have flocked to the service since it was rolled out in August.

"We can say that we protect the email inbox according to German law," says Jorg Fries-Lammers, a spokesman for one of the German companies, 1&1 Internet AG. "It's definitely a unique selling point."...

...It is too soon to tell if a major shift is under way. But the Information Technology and Innovation Foundation estimates that fallout from revelations about NSA activities could cost Silicon Valley up to $35 billion in annual revenue, much of it from lost overseas business. A survey conducted this summer by the Cloud Security Alliance, an industry group, found that 56% of non-U.S. members said security concerns made it less likely that they would use U.S.-based cloud services. Ten percent said they had canceled a contract.

"We talk to our sales leaders, who talk to customers every day, and this has the potential to significantly erode the trust of customers around the world," says John Frank, a deputy general counsel at Microsoft....