This is a huge deal. I live in Australia and I have been running businesses on the cloud for the last 3 years or so. I have rarely heard the issue of the PATRIOT Act raised and in spite of there being laws banning the transfer of personal data outside Australia, most people are quite lax about the issue and take the view that the risks are too small to be counted.

Those days are most certainly over. This stuff will affect companies like AWS and Rackspace the most, given that they are competing for contracts with companies who are seriously concerned about who can get at their data. I imagine nobody will flaunt the laws in Australia regarding international data transfers in future, and that countries where no such laws exist will enact some very quickly.

Any cloud based software company in the US which holds large amounts of data that could in any way be deemed to be sensitive is going to have a much harder time pitching to clients overseas who will increasingly opt for a decent local alternative over a foreign one should the option exist. The only thing that American companies can hope for otherwise is that there is no foreign alternative.

The world is not going to come to an end but for a lot of people, their jobs are about to get much harder and the government should be worried about this.