First a prolog to set the scene. I phoned customer service to pay my monthly bill this morning, forgetting that the time was just before 9am. Yes, I know on the bill it says that “Staff are available to take your call between the hours of 8.00am to 6.00pm Monday to Friday.” But the bill stationery was printed a couple of years ago and for the past year, the customer service hours have been 9.00am to 5.00pm, as the recorded message reminded me when I got through (it’s not the first time I’ve done this). So I called back a few minutes later after 9am, got through to an agent and settled the account with my payment card. It wasn’t overdue and there were no problems on the account. In fact, the bill confirmed that I’d successfully moved onto the new call and broadband tariff that I’d ordered in January.

So this afternoon, I got on a call at 5pm my time (9am Pacific) to get an update from the product team at Intacct on their latest release, and shortly after we got talking, I noticed that my Internet connection had gone down. It doesn’t often happen, but in my experience any faults are quickly resolved so I wasn’t panicked. One of the reasons I pay extra (I’ve always rather smugly told people) for the ntl:Telewest business service is to make sure I’m not left for days on end if there’s fault. So I phoned up the fault line, quickly got through to a human being, and reported the problem.

My jaw hit the floor when the techician at the other end of the line explained what had caused my outage: “the Remedy profile is showing the subscriber as ceased/disconnected.” The only way to resolve the problem, he went on, was to call customer service. Whose hours (as you may recall) are 9.00am to 5.00pm.

Yes, ntl:TeleWest customer services terminated my broadband service moments after closing down their call center for the night, leaving me with no way to challenge and resolve the issue for 8, no wait, SIXTEEN hours (time that, for someone doing a lot of business both in the US and in Europe, is crucial). How inane is that?

I’m posting this from a local Starbucks, using my BTOpenZone account (which I suppose BT, in its smug way, would say is an example of a lost subscriber ‘coming back to BT’). I’m still fuming. I don’t need this unwanted extra hassle just now. I’ve paid a premium rate to secure a better level of service and I’ve been a satisfied ntl:Telewest subscriber for two and a half years. I even upgraded my service package last month (and in all likelihood, the service termination has happened because someone has goofed the switchover). And all the company had to do to keep me happy was to have a policy of doing terminations while their customer service call center is actually open, so that if an error’s been made, the subscriber can get it fixed right away.

Instead, I’ve been dealt the sort of slap-in-the-face customer service #fail experience that one never forgets. One that could have been avoided by building a simple extra failsafe into the process.

UPDATE [added 11:21pm Pacific, 7:21am local time]: I’ve switched on this morning and, miraculously, the connection is back up and running without me even having to wait to call customer service at 9am. I’ve had no communications about this so I’m assuming some kind of internal process has automatically resolved the problem. For all I know it happened last night, I was too tired and fed up to check again later on.

To those in Talkback who say, I should calm down, get a backup and use a provider with 24×7 customer service: what really wound me up was when I called the 24×7 customer support and was told the problem could only be resolved by the 9-5 team. This was a huge failing in the support cover and that’s why I made it the main point of my write-up. As for backup, I have my iPhone and the option (which I used) of going to Starbucks, but I have learnt from the experience and I think I’ll investigate getting a secondary provider as a further failsafe.

And yes, to those who say this is a warning against relying on the cloud; I am keenly aware of the irony of this happening to me just a few days after becoming one of the new EuroCloud industry group’s European vice-presidents. Businesses of all sizes are increasingly reliant on the cloud, which means they must treat it as a critical service and make sure they have several layers of failsafe around their connection, while service providers must take their business seriously, offer robust services and have failsafe processes to back them up.

The news comes at the beginning of a week that will see the formal creation of EuroCloud, the new industry body representing SaaS and cloud vendors across Europe, at its inaugural European board meeting in Paris on Friday. I’m posting this from Paris, getting ready to represent EuroCloud UK and to meet the chairs of up to 15 other European countries from Sweden to Portugal and Germany to Ireland. With a membership of several hundred European vendors already, the EuroCloud project promises to dissolve the cloak of invisibility that SaaS and cloud players in Europe have found so hard to break through in the past.

That can only be good for adoption, which just like the vendors themselves, is not getting the visibility it deserves. When I spoke to Peter Bauer, Mimecast’s CEO, on Monday, he said something that intrigued me: “There’s a vast market opportunity in North America and in some ways, it lags behind Europe in SaaS adoption.” It’s not often I hear the sentiment expressed — conventional wisdom says that Europe succumbs to new waves in computer technology some two to three years behind the US. But it seems that late adoption of earlier technologies is giving European business a head start in adopting cloud-based services of the type Mimecast offers. “Take email security as an example,” explained Bauer. “In North America, there’s much deeper penetration of appliance- and software-based solutions than in Europe.” The same is true in email archiving, he added:

“Having launched in North America two years ago, the striking thing I’ve found is how much old technology exists in many customers around the email archiving space. Some customers have some very dated technologies running in their networks.”

As well as a crop of proven ventures reaching a size where they’re able to start expanding into the US market, there may now be more opportunities for smaller ventures in Europe to get funding. Sarah Lacy last weekend wrote about the views of European VCs such as respected investor Simon Levene, who has just left the London office of Accel Partners. “When it comes to early stage I’m just seeing a bigger market opportunity in Europe and Israel,” he told her. “There’s more of an opportunity [for a VC] to pioneer and strike new ground. That’s part of what was exciting to me when I moved back here seven years ago.”

The bottom line is, watch the news coming out of Europe on SaaS and cloud. There could be a lot more of it in the coming months and years. [Disclosure: I'm chairman of EuroCloud UK. See details of our upcoming meetings here.]

Last year, I started a long-term project to develop a framework for evaluating cloud platforms (disclosure: Intuit funded some of the initial work, which was published as an analyst report in October, Redefining software platforms, but it’s progressed independently since then). It’s timely today to discuss some of the core principles and what they tell us about the marriage brokered between Windows Azure and the Intuit Partner Platform.

Cloud platforms share many of the ingredients of conventional software platforms, but they add several crucial new ingredients. One thing that hasn’t changed is the need to build momentum among developers and customers for the platform. Intuit and Microsoft have plenty of both, which guarantees attention for what they’ve announced today. But the tie-up between these two giants is important too for the light it shines on the special characteristics of cloud platforms and how they change the game in so many ways for ISVs, developers and platform vendors.

Whatever its market reach, any platform stands or falls on its native capabilities. For a conventional software platform, those capabilities are really all about the functional scope of the development platform — what it empowers developers to create on the platform. Where cloud platforms differ crucially from conventional software platforms is that their native capabilities have to extend into three additional, distinct elements beyond the core functional scope. This is mapped out in the diagram alongside.

On the horizontal axis, the breadth of infrastructure extends beyond the development functionality to embrace the entirely new element of service delivery capabilities. This is a platform’s support for all the components that go with the as-a-service business model, including provisioning, pay-as-you-go pricing and billing, service level monitoring and so on. Conventional software platforms have no conception of these types of capability but they’re absolutely fundamental to delivering cloud services and SaaS applications.

With Microsoft’s heritage so firmly rooted in conventional platforms, Windows Azure has huge functional scope, but it has very limited service delivery capabilities. It sits firmly on the left-hand side of the diagram. In contrast, Intuit’s strengths lie more to the right-hand side. It has gone out of its way to build sophisticated service delivery capabilities into its Partner Platform — to the extent that developers can choose to continue hosting their applications on the functional platform of their choice, and just use IPP’s service delivery and go-to-market capabilities. This is precisely the configuration that the Azure SDK supports (with the option of linking into IPP’s data services too, which is especially useful for integrating to existing data the customer holds in Intuit packages such as QuickBooks).

To put it another way, the link-up combines Microsoft’s strengths in developer tools and functional scope with Intuit’s advanced skills and investment in service delivery on IPP.

The icing on the wedding cake of this marriage made in the cloud is the promise of Microsoft Online Services adding its BPOS offering into Intuit’s App Center. This places a very appealing milestone on the roadmap that encourages developers to start building to the Azure-Intuit platform in the knowledge that, by the end of the year, they’ll be able to connect in a range of email and collaboration capabilities based on Microsoft’s familiar, market-accepted application suite. It’s also an illustration of the sort of capability that comes in on the upper layer of the diagram, against the vertical axis of platform bandwidth. I’ll talk about these in more detail in a future post, because I’m just about out of time and space here, but suffice to say that the ability to connect into other services like BPOS is an example of what is meant by ‘cloud reach’.

The trouble is, many SaaS vendors will still be tempted into loss-making freemium plays of the kind Murphy warns about because there seems to be so much demand they can tap. That’s why I want to devote this blog post to examining why businesses should spurn free online services. Dear Mr/Ms Customer, it is not in your interest to be lured into using free for your business, and here are four good reasons why not:

It means vendors don’t invest in proper access controls. Most low-end free services target individuals (’consumers’) and so they’re built around giving access to a single user. If you’re a business, you’ll probably want more than one user to have access to the same account, but that sort of access control infrastructure is expensive to set up and manage, so free services won’t support it. That’s fine if you can start off free and then migrate to a paid version when you need more access control, but many freemium vendors don’t offer that option.

Here’s what I discovered this week when I wanted to bring another user into the MailChimp account that’s handling EuroCloud UK’s email campaign management (we needed to co-ordinate ahead of next week’s member meeting):

“Your MailChimp account only has one login per user with access to all areas of the account. We do not offer multiple users with different levels of access. If you need multiple users, feel free to share the login information as more than one person can be in an account at one time.”

That’s very limiting. And no mention of record locking, check-in/check-out and all the other controls that go along with multiple users. I would say, you get what you pay for, except Mailchimp simply doesn’t offer any of these functions, at any price.

It means vendors don’t invest in instrumentation. If there’s no fee, there’s little incentive to monitor usage patterns and service levels. Again, the infrastructure for this kind of capability is expensive, and if a vendor is focused on the kind of mass market that a free product has to appeal to, it’s unlikely to want to spend money on features such as SLA monitoring, uptime dashboards, real-time user support or detailed usage pattern analysis. This limits its ability to offer differentiated services that performance-sensitive business customers will pay good money for, forcing it to focus even more on volume rather than quality.

There’s no such thing as a free lunch. If the vendor is cutting corners on the above, what else is it skipping? Never mind functionality in the product, has it invested in enough advice and forethought to make sure it has a robust business plan? Probably not. “Many times ‘free’ is a cop-out,” writes Murphy — a phenomenon I once called the ‘lunatic fringe of freemium’. Murphy adds: “Business-focused people understand that free is not sustainable and they will wonder how long the vendor will be around if they do not charge for their product.” Indeed.

It restricts choice because only the big guys can survive. I have to dissent from another of Murphy’s assertions about freemium, however. “Rarely do existing companies wanting to bring a SaaS product to market default to freemium,” he writes. I can understand why, in a paper designed to discourage naive vendors from plunging into freemium, he might want to say that. But the assertion is disproved by, for example, Google, which chose freemium as the model for Google Apps, or Adobe, which is using freemium to drive forwards its SaaS strategy. I think we’re going to see established companies increasingly adopting the freemium model, but in many cases their motivation will be thoroughly pernicious: freemium by a big player effectively shuts a market to smaller competitors, because the mountainous investment required to build up sufficient market share to reach viability becomes too costly a barrier to entry.

Now you have been warned of the perils of signing up for a freemium service, I’ll conclude by highlighting the exceptions where a freemium strategy offers buyers a safer, more trustworthy choice. Murphy explains how freemium can work if a vendor with a proven, revenue-generating service offering then spins off a separate free service that is compelling enough to fund itself:

“In this version of Freemium, and after the appropriate market due diligence, companies will build a very simple, single-purpose Alternative Product (AP) that solves an immediate, specific and highly targeted need, but which promotes significant network effect and ecosystem opportunities well beyond that application … Users of this application will not need to convert to the flagship ‘premium’ product to generate revenue; the product is designed from the ground up to generate revenue by leveraging unpaid users … the single-purpose AP is also more likely to be spread virally than a larger, full-featured application suite.”

Such a service is still likely to kill off other, paid alternatives, but I guess we shouldn’t grieve: that’s capitalism in action. Examples that spring to mind include Adobe’s Acrobat.com offerings, which I’ve mentioned above, or SaaS recruitment software vendor MrTed’s launch of the free SmartRecruiters.com service in the US market (more on that in this more recent podcast).

Venture capitalist Bill Gurney, prompted by Google’s announcement of free turn-by-turn navigation in its Android mobile operating system, called this the ‘less-than-free business model’. It threatens to be highly disruptive, but the more disruptive it is, the bigger the spending it requires. Start-ups capable of achieving disruption on this scale are going to have to tap venture funding that runs to 9 figures (that’s before you get to the decimal point). Everyone else would be well advised to stick to building sound revenue first. And business customers should be wary of trusting any vendor that doesn’t have a self-evident revenue base.

That required a bit more clarity about what we’d actually be betting on, and the continuing conversation quickly showed up the constraints of Twitter’s 140-character limit. I resolved to dive into some of the underlying concepts in a blog post here today.

First of all, ‘discredited’. As I elaborated to SearchCloudComputing’s Carl Brooks, that means “No one likes using the phrase any more” — I was aiming to capture something halfway between the repulsion and embarassment people used to feel about, respectively, application service providers and intranets. People will still be using private clouds, but I believe they’ll feel increasingly ashamed or nervous of admitting it in public, except to fellow-users. The rest of the world will have moved on. I’m inclined to agree with Phil Morris that my timing was probably over-ambitious. Year-end 2011 or mid-2012 would have been a lot safer but hey, I wanted to be provocative. And I truly believe sentiment will have started shifting before the year is out.

Now let’s turn to ‘private’ and ‘cloud’. My definition of private is simple: not public. Randy Bias offered a list of defining features: “unshared, single tenant, self-service compute, storage, and network infrastructure.” He then went on to mention three varieties of private cloud: “virtual, external, or internal,” which is when I started to realize this was a much more nuanced discussion than our tweets were going to allow. It was obvious that some of his definitions of ‘private’ cut across into areas that I would define as ‘public’; and vice-versa.

For example, I have no objection whatsoever to virtual private cloud, so long as it’s a logical slice of a public cloud infrastructure, or as I wrote last August: “computing that operates within a public cloud but which uses virtual private networking to give individual enterprises the ability to mask off a portion of the public cloud under their own delegated control and management.” On the other hand, you can make your infrastructure as multi-tenant as you like, it’s not cloud if it’s confined within a closed, single-enterprise environment.

So when I talk about ‘private cloud’ as something the world will move on from, I’m not talking about cloud infrastructure that’s logically partitioned to make it private. I’m talking about physically private infrastructure that’s logically structured as though it were cloud.

This definition is clear-cut at the extremes, but of course there’s a shaded area in the middle where the two ends meet, and I suspect a lot of that shaded area is occupied by what Randy Bias calls ‘external private cloud’ (and is very bullish about). This is cloud infrastructure that’s hosted by third party providers, and I can imagine that some of it is going to be built on what I would regard as perfectly valid public cloud infrastructure, logically partitioned. But a lot of it is going to be as alluring as lipstick daubed on a pig, because behind the scenes the hosting providers will be doing a lot of covert physical partitioning to cut corners (actually, some of them will openly tout that partitioning as a selling point).

My litmus test for public vs private cloud is at a different level than multi-tenant architectures, firewall configurations and flavors of virtualization. In my book, a public cloud is one that’s concurrently shared by thousands of discrete customers, all of whom access precisely the same (though continuously enhanced) baseline functionality and have complete freedom of action (and control) over how they use that functionality within the constraints of the platform. The strength of the cloud model (and why public cloud will leave any variety of physically partitioned private cloud trailing in the dust) is the collective scrutiny, feedback and innovation that becomes possible when thousands of customers are using the same, constantly evolving, shared platform.

Perhaps the reason those benefits are not yet self-evident — and thus why this argument is so hard to put across — is that so far we’ve mostly been looking at infrastructure as a service, with Amazon Web Services as the most established example of a public cloud platform. The problem with that is, the shared platform only goes as far as the AMI, and from there on up, you fall straight back into private software instances with none of the benefits of a collectively shared platform. This year I think we’re going to be hearing far more about platform as a service, and that’s the layer at which people are really going to start leveraging the power of the public cloud and realizing how much they’re giving up by wanting to manage their own discrete, private software stacks.

One last thought. There’s a whole other discussion that needs to be had about how enterprises should migrate their IT assets to the cloud, because everything I’ve written above still begs the question of when and what to move to PaaS and/or IaaS, what to do with remaining on-premise assets, and whether in that hybrid environment of half-on, half-off the cloud there’s an argument for implementing private cloud-like infrastructure. The bulk of that discussion will have to wait for another post, but it may be that, although discredited in the sense that enterprises may not like to talk openly about it very much, there will be a lot of ‘private cloud’ going on for the next few years as part of those migration strategies.

“I’ve used the term people-oriented architecture to make a deliberate contrast with our experience of service-oriented architecture in the past decade. Unlike SOA — which too often sought to remake the way that computers talk to one another without any reference to or consideration of user needs and business results — people-oriented architectures have to be developed collaboratively and iteratively with users and business owners, giving them as much freedom and autonomy as possible to control and manage information and processes to achieve the results they want. It’s an acknowledgement that people are both the commanding providers and the ultimate end consumers of any of the services in a computing architecture.”

Another way of looking at this is to agree with blogging colleague and SOA maven Joe McKendrick that SOA is moving into a low-key “roll-up-your-sleeves-and-make-the-stuff-work stage”, while the business and user context comes to the fore. As an ebizQ reader commented, calling it people-oriented architecture is to use same technology jargon that has kept IT apart from the users, who just want to get on with it and don’t care what it’s called.

Of course it’s been the Web that has been instrumental in putting computing power in the hands of users in a way that lets them get a job done without having to become computing experts. Many of the trends I write about, including cloud computing, software-as-a-service and enterprise 2.0, are at the forefront of bringing the same access to computing power into the enterprise environment. This is a highly disruptive process on all fronts, but I think the biggest pressure points surround the more controversial fusion of social computing and enterprise applications that comprise enterprise 2.0. Many people are uncomfortable about using the word ’social’ in an enterprise context, but I made the opposite case in a post in November:

“… you can’t erase the human dimension out of the enterprise altogether. Ultimately, it’s the people that assess risks, do deals, manage change, take decisions and earn the rewards of success (or carry the can for failure). Corporate management and business itself are essentially social activities in that they depend on interactions between people. That’s why computing has to evolve to become social — to become people-centric instead of merely machine-centric … Enterprise 2.0 is technology that seeks to eliminate many of the inefficiencies that get in the way of productive interaction and collaboration, automating social processes in the same way that earlier generations of computing automated data processing.”

That’s not to say enterprise 2.0 is an instant cure-all. People-centric IT only makes sense if it empowers people to achieve results. This is exactly what Dennis Howlett cautioned about in his blog post yesterday, Enterprise 2.0: Totally Unacceptable: “… of itself and even with technology adopted, you gain nothing of substance without context and process. All you gain is more content … What we have so far is content and some context. We’re missing process strategically designed to achieve business goals.”

I believe we’re at a breakthrough point precisely because technology has matured to the point that it’s flexible enough to be adapted to what the people who use it are trying to achieve — to empower them to refine the automation and processes that help them fulfil their roles as effectively as possible. We no longer have to ask people to change their processes to fit in with the demands of punch card runs or application stovepipes or implementation and upgrade cycles. We now have information technology that’s sophisticated enough to fit in with how human beings work and behave, and that’s why people-centric IT is a defining theme for the new decade, requiring information technologists to develop new skills and ways of working that deliver results the people demand.

I know that many VCs still favor the approach espoused by the likes of Twitter and Facebook, which uses venture funding to grow a dominant user base before worrying about revenues. Personally, I see some big flaws in this model:

• It’s difficult enough to pull off in the consumer market, much tougher still in the business market, even if you’re targetting the volume small business market or professional individuals.
• If people are going to point to Facebook’s growing revenues as proof that the model works, I’d urge them to look under the covers at where exactly these revenues have been coming from.
• It looks a bit too much like pyramid-scheme economics to me. There are a handful of well-publicized success stories, and hundreds of forgotten or unheard-of failures. That’s fine for the VCs who back the winners, but it’s tough on the entrepreneurs and angels who lose out.

My preference, often expressed throughout the year, is for sound business revenues, earned in exchange for delivering real business value. I think this is especially true for providers that target the small-to-mid-sized business market, since these in the main are organizations that themselves earn their revenues by producing real goods and services of value and selling them to customers. This is a sound, stable, reliable source of revenues that’s relatively recession-proof if you spread your footprint wide enough. Selling concrete, measurable services plays well with larger enterprises, too, but it takes longer and costs more to close each deal, so you need to be careful you’re not spending more on customer acquisition than you’ll earn back once they finally sign up.

Giving away some services for free still has a role as part of a marketing strategy to help get your company in front of prospects for your paid services — popularly known as ‘freemium’. But it must be carefully costed, monitored and managed — for more on this, see How to make freemium pay and What your bank can teach you about freemium. Too many start-ups are masquerading as would-be Facebooks or YouTubes — persuaded that they’re ramping up user numbers in readiness for future revenues, an IPO or a successful sale to Google — when in fact they’re just executing badly on a freemium strategy. Even Chris Anderson, whose 2009 book, Free: The Future of a Radical Price, doesn’t actually believe in giving stuff away without a sensible freemium strategy in place, as he told John Gapper of the Financial Times:

“When I refer to a ‘new economic model’, I’m not referring to slapping advertising against stuff, which dates back centuries. Instead, I’m talking about the underlying economics that allow Freemium to work … I think that creating business models around Freemium — what to charge for and what not to, a question determined as much by psychology as economics — will be the most interesting, and lucrative, efforts of this online era. And the book, both in its chapters and its tactical advice at the back, is intended to help guide that.”

It’s important to think about diversified revenue streams, rather than pinning everything on a single source, whether it’s subscriptions, advertising, or some other mechanism. A company like Google may seem to be an unchallengeable leviathan with its billions of dollars in revenues, but it’s far too dependent on the single engine of Internet advertising for my liking. Its enterprise division is crucial to the company’s future in establishing a second, subscription-based revenue stream, and if I were in charge over there, I’d be putting even more energy and investment into ramping up that part of the business. On the other hand, most SaaS vendors are too dependent solely on monthly subscriptions. Consider several different revenue options:

• Subscription is widely used but can be complex to administer and is often difficult to price in relation to variable costs before you get a broad base of customers from which to establish usage patterns. Adding some element of pay-for-usage helps to offset some of the risk of bundled pricing but instead lands customers with the forecasting headache.
• Advertising can help fund freemium plays and viral marketing strategies but doesn’t always play well in the business market. Be careful where you use it, so that users aren’t distracted by advertising from completing tasks; and beware of ads that give competitors a presence inside your application or which introduce content that undermines your positioning.
• Transaction fees are often overlooked but in fact are the most proven Web revenue generator. This is how web giants including Google (by taking a cut on advertising transactions), eBay and PayPal all make pots of cash. Done well, it can be a huge, invisible money-spinner.
• Digital goods is the new term for any virtual, third-party service you sell within your own online service. I find the term misleading; it originates in the games industry, where digital goods are usually performance aids that players buy, but in a business environment the service may often be performed by a real person acting remotely. I’ve called it promotion or placement in the past and I see it becoming bigger than (and partially replacing) online advertising over time.

My final word of advice is, remember to collect! It’s astonishing how often SaaS and cloud providers belatedly realize they have a huge backlog of unpaid invoices, disputed bills and canceled credit cards clogging up their cashflow. Make sure you think about the entire order-to-cash cycle (and how to automate it), not just producing the bill. For more on this topic, watch this short video I recorded a year ago: Phil’s top 3 SaaS monetization tips. And I wish all my readers a happy — and prosperous — New Year.

I still see migration to the cloud as a journey, but I’m concerned that too many people, especially with the advent of platforms like Windows Azure, have decided they can achieve all the benefits by going just some of the distance. This is a risky self-delusion, and the more people fool themselves this way, the more the cloud model will be discredited, not because of inherent weaknesses, but through implicit association with the disasters and disappointments these half-hearted implementations will bring in their wake. There are several different cloud delusions to beware of.

Amateur cloud. The year’s third most highly trafficked post on this blog was The cloud, no place for amateurs. It picked out two examples of established, reputable computing companies that had let down customers who were depending on them for computer operations — in one case the victim was a single large airline, in the other it was a large number of mobile phone subscribers. Many reputable providers (and their customers) believe that enterprise size and computing experience are in themselves guarantees of the reliability of any cloud services they operate, whether for enterprise or consumers. This is a gross self-delusion. My follow-up post gave advice on How to avoid the amateur cloud.

Firewall jealousy. A related delusion is to put more trust in your own organization’s security measures than in those of a cloud provider’s — even if the cloud provider employs many more security staff in round-the-clock shifts, has significantly more security expertise and operates much better processes based on the highest level of best practice. This ‘not my firewalls’ mentality — a variation on ‘not invented here’ — is especially egregious if your so-called ‘on-premise’ computing is actually off-site at some non-descript colocation center shared with an unknown number of other organizations.

Fool’s cloud. This is my term for what others persist in referring to as ‘private cloud’, and which I’ve also called ‘captive cloud’ and ’stagnant cloud’ (the latter because of the way state-of-the-art implementations quickly fall behind when shut off from the continuous, collective scrutiny and collaborative innovation of the public cloud). My advice is, Beware the allure of Fool’s Cloud. In the final decade of the previous century, rich enterprises deluded themselves they could get all the benefits of the Internet by implementing their own private versions. Today, many are destined to repeat this extravagant delusion by attempting private versions of cloud computing. Take my word for it: you can’t take computing out of the cloud and still call it cloud computing.

Isolated multi-tenancy. Some vendors have taken the view that it’s possible to take multi-tenancy out of a cloud context without losing any of the benefits of cloud computing. At the beginning of the year, I did wonder if they had a point. In March, I welcomed platform-as-a-service provider LongJump’s introduction of an on-premise option as satisfying a pent-up market demand for SaaS development platforms. I examined the claims made for Salesforce.com’s breed of multi-tenancy when the company opened the kimono on its ‘green crystals’. I was intrigued by Intalio’s blueprint for taking multi-tenancy on-premise. I examined whether multi-tenancy could co-exist with on-premise computing assets. But in the end I came to the conclusion that the crucial point about multi-tenancy is that it enables a better fit for the cloud. Organizations are adopting cloud computing because their customers, suppliers, partners and employees are all doing business and interacting in the cloud already, and multi-tenancy makes no sense except as an enabling component for uncapped connectivity to every other business and resource out there in the public cloud.

Half-aaSed applications. One of the very first posts when I started writing this blog in 2005 introduced the notion of SoSaaS: Same old Software, as a Service. The phenomenon of taking any old software package, running it up on a server and putting it on pay-as-you-go pricing is alive and well in the cloud computing era, fueled by incomplete appreciation of what cloud computing is really all about. Today, it’s easier than ever to spin up an app on a virtual instance at any of dozens of public cloud and platform-as-a-service providers, from Amazon Web Services, Rackspace or OpSource Cloud to Windows Azure, Heroku, Google App Engine or Joyent. But cloud computing and SaaS go far beyond merely a relocation exercise. Developers should not delude themselves. The as-a-service business model requires “a real-time service infrastructure and culture, able to interact with and respond to the needs, interests and dynamics of customers and their own connected networks.” The cloud equivalent of SoSaaS is a half-aaSed application: one that’s been deployed to a multi-tenant cloud infrastructure without being re-architected to allow its users to take advantage of the real-time, bandwidth-rich, shared-API environment of the public cloud.

From this malevolently auspicious beginning, the writer then goes on to catalog the usual tirade of Reasons Why The Cloud Cannot Be Trusted. These include such revelations as the finding that “cloud services … are not without risk” and that “any breakdowns or hacks could prove devastating to many.” You don’t say?

I’m wondering when researchers at MIT are going to turn their attentions to the security problems inherent in the size and structure of buildings and cities?

It’s not widely known that, by studying architectural blueprints and familiarizing themselves with routine security processes typically followed by businesses, hackers could break into your offices and access highly sensitive data. Indeed, say researchers, it’s theoretically possible to download the entire contents of a corporate database onto a solid-state drive so small that it can be smuggled out of the building concealed in a back pocket. Yet most businesses remain blissfully unaware — some would say, wilfully negligent — of the ease with which their on-premise data can be compromised.

Meanwhile, there have been many examples of entire cities losing all access to computing functions after extended power blackouts because of a shared dependency on a single utility grid. Only a small proportion of businesses protect themselves against a total loss of computing capability by turning to cloud providers whose multi-geography infrastructures aren’t dependent on a single power supplier.

But we don’t read that. Instead, we have an article which is little more than a diatribe against the notion of relying on an expert provider to operate computing on your behalf. Except, that is, for a revealing passage halfway through, in which the author cites the case of an unnamed bank that, distrusting the cloud, has instead co-located its servers at “a nondescript data center in Somerville, MA … owned by a small company called 2N+1, which offers companies chilled floor space, security, electricity, and connectivity.” Unaware of the implicit irony, the writer concludes that the bank “chose to keep its own servers rather than hire a cloud. And for security, the bank chose the tangible kind: a steel fence.” Yes, because of course, cloud providers, as the name suggests, protect their facilities with dry ice and cotton wool, don’t they?

At least there’s some consolation in the closing paragraph of the article, which contains a lesson from history that may yet give cloud doubters pause for thought (my emphasis added):

“The advent of radio posed similar issues a century ago, says Whitfield Diffie, one of the pioneers of public-key cryptography, who is now a visiting professor at Royal Holloway College at the University of London. Radio was so much more flexible and powerful than what it replaced — the telegraph — that you had to adopt it to survive in business or war. The catch was that radio can be picked up by anyone. In radio’s case, fast, automated encryption and decryption technologies replaced slow human encoders, making it secure enough to realize its promise. Clouds will experience a similar evolution.”

Looking back, it’s obvious that one titanic struggle has loomed large over the SaaS and cloud landscape: the battle for your email. The year’s most highly trafficked blog post here was the story in March, Microsoft pumps cloud, trumps Google with GSK, when Microsoft Online Services revealed a 100,000-seat deployment by pharmaceuticals giant GlaxoSmithKline (GSK) of its hosted Exchange, Sharepoint and LiveMeeting service. Of course, any headline that mentions both Microsoft and Google is always going to attract a lot of traffic, but the icing on the cake here was some rombustious comments by Ron Markezich, corporate VP of Microsoft Online Services, about Google’s enterprise credentials, dismissing Google Apps as “a consumer service that’s not enterprise-ready.”

There’s no doubt that Google desperately wants to be taken seriously as an enterprise-class provider. The Google Enterprise team, whose product portfolio includes Google Apps and extends across the search appliance and a couple of other offerings, spare no expense to get the word out about their corporate wins. I was astonished a few months back to have a courier hand-deliver a press release the day Google announced a 35,000-seat roll-out of Google Apps at business services conglomerate Rentokil Initial. The box also contained a white mouse made out of candy, which, since it was lying on its side (see pic), I assumed was deliberately designed to represent a dead mouse (Rentokil is best known for pest control). My tweeted reaction inadvertently pushed the boundaries of good taste, incorrectly describing it as a “candied dead mouse,” which would have been totally gross.

Yet there’s still a question mark over whether Google is spending as much on actual investment in beefing up its Google Apps infrastructure as it is on promoting news of its customer wins. I know Google can point to its huge, seemingly infallible search and ad serving leviathans as living evidence of its planetary-scale infrastructure capabilities (in stark contrast to Microsoft’s recent 45-minute outage of its Bing search engine). But in a mirror-image of Microsoft’s Bing problems, Google is still learning the ropes with Gmail (this year’s fifth most trafficked post) and has not been immune to outages. On top of that, keeping the lights on is just part of the story when it comes to serving enterprise customers. They want account management, reporting and governance, and Google — along with the rest of the Web giants — still isn’t very good at personalized customer service.

There’s a tendency to see the battle for your email as a two-way fight between Microsoft and Google — between the established leader and the next-gen pretender — but Microsoft has played an accomplished defensive game by introducing its own hosted services, transforming itself into a cloud player and allowing customers to remain loyal to its existing products while benefitting from the SaaS model. You can see that as Microsoft taking the fight to Google’s turf — while Google’s introduction of a reseller channel was an astute strike at Microsoft — but both vendors are selling the cloud model.

In 2009, the real carnage has been among the second-tier groupware vendors, with IBM/Lotus and Novell both losing prime accounts to the big two online players. As Markezich noted when we spoke last month, three quarters of the Online Services division’s enterprise customer wins “are coming from a non-Microsoft platform — predominantly [Lotus] Notes.” Rentokil was “less than 20 per cent” on Microsoft Exchange when it plumped for Google to consolidate forty separate mail systems, said its CIO (and it took the decision long before Microsoft Online Services was available to try). Meanwhile, the extent to which Novell is hurting was revealed by its curious decision to publicly criticize City of Los Angeles for dumping Groupwise in favor of Google Apps.

Moving to cloud platforms has given organizations like these a long-awaited opportunity to decommission outdated, inefficient, unmanageable collections of legacy email systems without having to endure lengthy, complex and risky implementations of an on-premise replacement. In such environments, cloud wins hands-down, and the decision whether to go with Microsoft or Google largely comes down to cost, functionality and integration needs. The battle between the two vendors in 2009 has largely been a phoney war of words, accompanied by brief skirmishes on the sidelines against ill-equipped smaller foes. It will all get a whole lot more interesting and serious in 2010, especially with Cisco emerging from earlier setbacks to join the fray, along with a number of other contenders.

The battle for your email in 2010 will also go beyond the question of which vendor will take over your email servers, for email itself is being challenged by other forms of communication. Email still has a role — just as physical mail continues — but it is ill-suited to activities such as sharing data, sending and receiving status updates, and real-time or threaded collaboration. The battleground is shifting to the broader landscape of collaboration platforms that handle email alongside these other channels of communication, and the vendor that delivers the best way to bring these various channels together will have a competitive advantage. In that respect, Salesforce.com’s announcement of Chatter last month may prove a surprisingly inspired strategic move.

Collaboration goes right to the heart of what the Web is about, and I can’t believe that email (literally, an electronic embodiment of what we used before the Web existed) is going to remain the mainstay of how we communicate with each other in the Web era. Among all the reasons why you would want to put email in the cloud — better threat protection, more powerful search, lower storage costs and simpler archiving, to name but a few — perhaps the most important is being ready to migrate from email to the next generation of business collaboration, whatever that turns out to be (and no, I don’t think it’s going to be Google Wave, except for certain very specific use cases).