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Xnon-to: PRESIDENT(a)WHITEHOUSE.gov
The New York Times, April 7, 1997, pp. D1, D7.
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U.S. Restrictions on Exports Aid German Software Maker
By EDMUND L. ANDREWS
BOBLINGEN, Germany, April 3--Boris Anderer and his four partners have a
message for the spy masters in America's national security
establishment:
thank you very, very much.
Mr. Anderer is the managing director for marketing at Brokat
Informationssysteme G.m.b.H., a three-year-old software company here
that
is growing about as fast as it can hire computer programmers.
When America Online wanted to offer online banking and shopping services
in
Europe, it turned to Brokat for the software that encodes transactions
and
protects them from hackers and on-line bandits. When Netscape
Communications and Microsoft wanted to sell Internet software to
Germany's
biggest banks, they had to team up with Brokat to deliver the security
guarantees that the banks demanded.
But what is most remarkable is that Brokat's rapid growth stems in large
part from the Alice in Wonderland working of American computer policy.
Over
the last two years, Brokat and a handful of other European companies
have
carved out a booming business, selling powerful encryption technology
around the world that the United States Government prohibits American
companies from exporting.
Mr. Anderer could not be happier. "The biggest limitation on our growth
is
finding enough qualified people," he said, as he strode past rooms
filled
with programmers dressed in T-shirts and blue jeans.
The company's work force has climbed to 110 from 30 in the last year,
and
the company wants to add another 40 by the end of the year.
"This company has grown so fast that I often don't know whether the
people
I see here have just started working or are just visitors," he said.
Encryption technology has become a big battleground in the evolution of
electronic commerce and the Internet. As in the United States, European
banks and corporations are racing to offer on-line financial services,
and
many of these services are built around Internet programs sold by
American
companies like Netscape and Microsoft.
Cryptography is crucial because it provides the only means for
protecting
customers and companies from electronic eavesdroppers.
Though the market for encryption software is in itself tiny, it is a key
to
selling technology in the broader market of electronic commerce.
Encryption
is the first line of defense against hackers eager to pry loose credit
card
information and raid bank accounts, so it plays a critical role in the
sale
of Internet servers and transaction-processing systems.
Brokat, which has revenues of about 10 million marks ($6 million), uses
its
cryptography as a door-opener to sell much more complicated software
that
securely links conventional bank computer systems to a bank's Internet
gateways and on-line services. Netscape, Microsoft and computer
equipment
manufacturers all include encryption in the networking systems they sell
to
corporations.
But the United States Government blocks American companies from
exporting
advanced encryption programs, because agencies like the Federal Bureau
of
Investigation and the National Security Agency fear that they will lose
their ability to monitor the communications of suspected terrorists and
criminals.
Far from hindering the spread of powerful encryption programs, however,
American policy has created a bonanza for alert entrepreneurs outside
the
United States. Brokat's hottest product is the Xpresso Security Package,
a
set of computer programs that bump up the relatively weak encryption
capability of Internet browsers from Netscape and Microsoft.
Besides America Online, Brokat's customers include more than 30 big
banking
and financial institutions around Europe. Deutsche Bank A.G., Germany's
biggest bank, uses Brokat's software at its on-line subsidiary, Bank 24.
Hypo Bank of Munich uses Brokat in its on-line discount stock brokerage
operation. The Swiss national telephone company and the Zurcher
Kantonalbank are also customers.
Among Brokat's competitors, UK Web Ltd., based in London, is marketing
an
equally powerful encryption program in conjunction with a Silicon Valley
company C2Net Software. Recently, UK Web and C2Net boasted of selling
"full-strength" cryptography developed entirely outside the United
States.
"We don't believe in using codes so weak that foreign governments,
criminals or bored college students can break them," the two companies
said
in a statement, in a stinging swipe at the American export restrictions.
Bigger companies are starting to jump into the fray as well.
Siemens-Nixdorf, the computer arm of Siemens A.G., recently began
marketing
a high-security Internet server program that competes with products from
Netscape. Companies can download the software from Siemens computers in
Ireland.
There is nothing illegal or even surprising about this. The basic
building
blocks for advanced encryption technology, a series of mathematical
algorithms or formulas, are all publicly available over the Internet.
American companies like Netscape sell strong encryption programs within
the
United States, and companies like Brokat are even allowed to export
their
product to customers in the United States.
For many computer executives, the real mystery is why the United States
Government continues to restrict the export of encryption technology.
"The
genie is out of the bottle," said Peter Harter, global public policy
counsel at Netscape, who complained that American policy thwarts his
company's ability to compete.
"I have a good product, and I can sell it to Citibank, but l can't sell
it
to Deutsche Bank," Mr. Harter said. "It doesn't make any sense. Why
shouldn't they be able to buy the same product as Citibank? It makes
them
mad, and it makes us mad."
In response to industry complaints, American officials have repeatedly
relaxed the restrictions on encryption over the last several years, and
they did so again last November. But because the speed of computers has
increased so rapidly codes that seemed impenetrable just a few years ago
can be cracked within a few hours.
In a policy announced last fall, the Clinton Administration announced
that
it would allow American companies to freely export cryptography that
used
"keys" up to 40 bits in length. The longer the key, the more difficult a
code is to crack. But banking and computer executives say that 40-bit
codes
are no longer safe and can be cracked in as little as a few hours by
skilled computer hackers. The minimum acceptable code, according to many
bank executives, must have keys that are 128 bits long.
"From our point of view, there is at least the possibility that a 40-bit
encryption program can be broken, and that means there is a danger that
our
transaction processing could be compromised," said Bernd Erlingheuser, a
managing director at the Bank 24 unit of Deutsche Bank. Bank 24 has
about
110,000 customers in Germany who gain access to banking services over
the
Internet using either the Netscape Navigator or Microsoft's Internet
Explorer.
Anette Zinsser, a spokeswoman for Hypo Bank, concurred. "Forty bits is
just
too low," she said. Hypo Bank offers Internet-based banking and discount
brokerage services to about 28,000 customers.
In a country not known for high-technology start-ups, Brokat jumped at
the
opportunity. Mr. Anderer, a former consultant at McKinsey & Company in
Germany, teamed up three years ago with two fraternity friends, Michael
Janssen and Stefan Roever, and two seasoned computer experts, Achim
Schlumpberger and Michael Schumacher.
The group originally conceived of building a company around modular
software components that were designed for the banking industry, and
they
financed the company for nearly two years through the money they earned
from consulting projects. But they were quickly drawn to the area of
encryption, and developed a series of programs around the Java
technology
of Sun Microsystems.
The Xpresso encryption package is installed primarily on the central
"server" computers that on-line services use to send material to
individual
personal computers. Customers who want to connect to a bank's server
download a miniature program, or applet, that meshes with their Internet
browser program and allows the customer's computer to set up an
encrypted
link with the server. The effect is to upgrade the 40-bit encryption
program to a 128-bit program, which is extremely difficult for outsiders
to
crack.
Now, in another step through the looking glass of encryption policy,
Brokat
is trying to export to the United States. There is no law against that,
but
American laws would theoretically prohibit a company that used Brokat's
technology from sending the applets to their online customers overseas.
So
the company is now negotiating with the National Security Agency for
permission to let American companies send their software overseas, which
is
where it started from in the first place.
If Brokat convinces the spy masters, the precedent could help American
software rivals. "This could open a new opportunity that would benefit
American companies if they understand the implications," Mr. Anderer
said.
[Photo (14K)]
The five managing partners and founders of fast-growing
Brokat Informationssysteme are (left to right) Boris Anderer,
Michael Janssen, Achim Schlumpberger,
Michael Schumacher and Stefan Roever.
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Why don't you fucking losers at the whitehouse just line
American businessmen up against the wall and blow their brains
out?
Go to Germany and buy a fucking clue (if American $ are still
worth anything by the time you're done fucking American business.)
TruthMonger (#2)
