Yesterday’s outage of Amazon’s Elastic Compute Cloud - ironically, as I was giving a talk on cloud’s contractual perils - highlights the need to scrutinize the small print. Just as more organizations explore cloud opportunities, cloud risks may outweigh benefits.

Cloud contract terms, and crucially, service level agreements (SLAs) fail my tests for contractual risk. In my upcoming report, ‘Cloud 99.99,’ I’ll detail problems with specific contracts, suggest tools to mitigate risk and discuss how leading innovators are finding remedies. Here’s a taster:

1. What SLA? SLAs are not uniformly available, even from well-known brands, according to my vendor analysis, from Amazon to Zoho. Self-certification of ‘best efforts’ is common, but legally toothless.
2. Uptime is mediocre. Good luck finding 4, let alone 5 ‘9’s (99.999% uptime). And even if you do, unlimited maintenance events won’t be in the calculations.
3. It’s not their problem. Besides demanding full indemnity for any damages (which is typically not reciprocal), get out clauses for liability include physical service demarcation points (eg: not beyond the server farm) and network congestion.
4. They won’t pay up. Forget liquidated damages. Penalties for non-performance are usually limited to contract termination or at best service credits.  These are gated in value, and usually, it’s up to you to argue the claim (within a specific timeframe).
5. Prolonged complaints aren’t welcome. Arbitration clauses are usually missing.
6. Foreigners beware. It’s not unusual for the contract’s governing law to reflect where a vendor is incorporated. That might be thousands of kilometers away from you (eg: California when you are in the U.K.), and alien to you in legal practices. But some contracts also specifically exclude the possibility of invoking the United Nations Convention on Contracts for the International Sale of Goods. This was purposefully designed to provide a common legal lingua franca in case of disputes involving parties in different jurisdictions.
7. Terminate at your peril. So, to hell with them. But how much time have you got to extract your data from the vendor? Miss the deadline and your valuable data will be expunged.

The good news? These issues only strengthen the case for a closer relationship between cloud vendors and communication service providers (CSPs). What’s been described as a parasitic dynamic fraught with rivalry is actually symbiotic. CSPs have the know-how that many cloud vendors lack, particularly in dealing with enterprises. Cloud vendors - particularly in the SaaS realm - are creating innovative productivity tools. As I’ll argue, each needs the other badly to monetize the cloud on a volume basis.

Not least, there is an urgent need for intermediaries to broker, aggregate, secure and monitor disparate cloud services - particularly as standards, service levels and interworking remain in flux (see Deutsche Telekom’s Zimory for a compelling example). In future, I believe that enterprises will pay trusted intermediaries to act as operational integrators and SLA managers across private, public and hybrid cloud contexts. Bottom line: The view’s great from the cloud, but don’t ignore today’s earthbound concerns.

With the NFC market still as dormant as Jefferson Airplane (talked about for years, still kicking around and never sure when they’ll make another appearance), recent announcements about turning a mobile device into a credit card terminal using applications got me thinking. Will SMB’s lay the groundwork to mobile payments success? The two announcements I’m referring to are from a start-up named Innerfence and the well known developers of Quicken; Intuit. With both of these services, SMB’s will be equipped to type a credit card number, securely transmit the payment details for processing and email or SMS the receipt to a customer.

Initially, I began wondering whether SMB demand even existed for these merchant solutions. After speaking with fellow YG analyst Steve Hilton, the answer was yes and the discussion moved beyond SMB demand. Although these solutions have too many fees (interchange fees, monthly account fees, and setup fees) the fact that a field service worker does not invest in an expensive network connected payment terminal will force SMB’s to consider this solution. Assuming that these services fulfill all PCI compliance regulations, our discussion quickly evolved into one of consumer interest in this solution. While the merchants certainly would see the benefit of a portable credit card solution, would a consumer feel comfortable handling a credit card over to an electrician they found on Craigslist?

This issue of consumer acceptance will plague the usage of these solutions. Although an SMB can launch a credit card transaction service for a nominal cost (Intuit charges $59.95 setup + $19.95 monthly fee and Innerfence charges $49.99 to download the mobile application and $25 monthly fee), a large amount of consumer education is required to ease concerns about the security of these services. Although handing someone your credit card at a restaurant and having them disappear for a few minutes or having a shopkeeper without a broadband or dial-up connection take a paper imprint of your credit card has risks, consumers are conditioned that this is acceptable. It will require years to change those beliefs in the minds of consumers and will limit the acceptance of portable credit card services for the SMB channel.

When we get to NFC, which Yankee Group’s soon to be released forecast expects only 13 million NFC enabled devices in North America by 2013, NFC processes will ease some of the consumer hesitancy in handing over a credit card to a cell-phone-wielding electrician. Having an electrician type your credit card digits into his cell phone feels a lot more risky than the electrician tapping his cell phone against your credit card. Consumers will be able to tap a device against a merchants phone to pay for a service and although it will not eliminate the security concerns, it will eliminate the need to manually type credit card details.

Greetings from Cisco Partner Summit 2009 from Boston, Massachusetts. Boston is home of the Red Sox, Boston clam chowdah and John F. Kennedy. With beautiful weather today it’s a fitting location for Cisco’s announcement of 6 new architectures. Architectural plays are globally coordinated, cross-functional roadmaps helping Cisco delivers unique value to its customers and channels. Architectural technology can include applications, network services and infrastructure optimized to deliver a competitive advantage for Cisco.

My task is to translate the Cisco architecture language into SMB-friendly notions. Not always an easy task I must admit, but it’s early in the day. Let’s see how I do.

Architecture #1 – Service provider IP next generation network (NGN). Obviously this architecture is focused on driving the next generation of intelligent, efficient, scalable IP networking into service provider markets. At some point way down the supply-chain, this should help more small businesses become connected to the information superhighway. In the U.S. over 90% of SMBs are connected to the internet, no so globally. In the developing world, having 10% SMBs with Internet connectivity is a milestone. NGNs help connect our world and increase the standards of living across the globe.

Architecture #2 – Collaboration. We’ve done quite a bit of work on collaboration and the workforce of tomorrow. In fact, Josh Holbrook just did a webinar on the very topic.

Imagine SMB employees being able to collaborate using voice, text, video over fixed and wireless networks. Have you ever seen a college student on a computer? Multiple stimuli, multiple streams of input/output are the norm. As Rebecca Jacoby, Cisco’s CIO stated today, the technology environments for enterprises (and SMBs) must support innovation and operational excellence at the same time. Collaboration fuels both.

Architecture #3 – Data center. This one is a stretch for SMBs. There aren’t a heap of SMBs building rich, robust data center environments, however, SMBs do take advantage of hosted data center environments offered by service providers. The technologies – virtualization, security and green IT to name a few — these service providers use in their data centers can give medium businesses future business advantages.

Architecture #4 – Borderless Network. Imagine SMB employees being able to access data or applications wherever they are on any device. Yankee Group’s mission is founded on this concept, Yankee Group being the global connectivity experts. To Cisco a borderless network allows the agile delivery of new applications while allowing more simple management, security, scaling and governance of the network. Lofty goals for SMBs, but all very relevant.

Architecture #5 – Small Business. I’ll treat this architectural approach in a separate vodcast and blog posted tomorrow when the news is public, but suffice it to say Cisco continues to address SMB in a cross-functional, globally coordinated manner.

Architecture #6 – Consumer. The lower end of SMB markets takes many cues from consumer segments, so attention to this architectural approach is important. We haven’t heard much on the consumer architecture, but maybe more later.

Those are the 6 Cisco architectures for 2009 through the eyes of a humble SMB analyst. Time to grab a bottle of Sam Adams beer.

Employee work habits are radically diverging from historical patterns. Anywhere–the emergence of ubiquitous connectivity–is changing both where people work and how they collaborate. Remote working is becoming a prerequisite for workers. However, companies have been slow to react, resulting in lower productivity and isolated employees.

According to a Yankee Group survey, nearly three-quarters of workers believe allowing employees to work from home benefits the company. In addition, the majority of workers indicate that the ability to work from home is the single most important thing their company could do to increase their productivity. Employees are demanding flexibility, and the companies that fail to react to this trend will be at a severe competitive disadvantage in the war for talent.

Earlier today, Zeus Kerravala and I hosted a webinar about the workforce of tomorrow. We discussed employees’ technological, social and professional needs and how to keep them connected. The presentation included:

• The pitfalls of and connectivity solutions for remote working
• Framework for mobilizing the workforce
• Recommendations for companies

The webinar runs about an hour: audio (mp3) and slides (pdf).

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I think one of the first reports I ever wrote for Yankee Group six years ago commented on Latin American executives who still get their secretaries to type their emails. Maybe we have moved on a bit but some habits are hard to break. Executives may actually use their Blackberrys but now the issue is “who else gets to use one?”

RIM invited a number of analysts to their annual Wireless Enterprise Symposium event in Orlando. This event brings together enterprise clients — lots of CIOs — operators and developers to hear the latest announcements and pick up on the latest mobile enterprise (and Blackberry) trends.

The expected crowd was around 5,000 and it certainly looked like the organizers achieved their objective. I didn’t get an official count of Latin American attendance but the US Immigration official at Miami airport told me on Monday that he had seen several come by that morning for the same event. Since the Miami immigration hall is huge, that must mean lots of Latin American attendees. Certainly I frequently heard Spanish and Portuguese being spoken in the corridors.

RIM set up an informal roundtable for some LA-oriented analysts (including your correspondent) to talk to Latin American developers who were attending the show. There were the usual complaints about operators (can’t live with them; can’t live without them) and a couple of complaints about RIM but surprisingly few. These were passionately devoted Blackberry developers (at least those that RIM assembled for the roundtable).

The surprise was that they still reported some client prejudices about handhelds and enterprise mobility that I thought were going away at least among large enterprise clients:

·         “Blackberrys are only for executives.”

·         “I can’t give something that expensive to a worker.”

·         “These things are only for email and workers don’t need email.”

·         And my personal favorite… “I can’t give my subordinate a device that’s the same as mine or costs the same.”

(The later opens up a lively debate about whether RIM should introduce a “bargain basement” Blackberry to pander to this prejudice or stick to their strategy until these dinosaur-managers come around — or get wiped out!)

The cases weren’t isolated and they certainly weren’t exclusively small companies. Some developers reported that SMB’s were MORE open to enterprise mobility but this tended to be in smaller markets where large companies are more likely to be either branches of multinationals with no local power or entrenched family businesses.

Certainly it was clear despite evangelizing by vendors and thousands of PowerPoint slides by the analyst community, broad-scale enterprise mobility isn’t yet a business decision rather than some sort of emotional status-related decision. But this shouldn’t have us give up hope (nor stem the PowerPoint flow — analysts have to eat too).

Prejudice can only be cured by education.

Frankly, this is a role — and an opportunity — for the operators.

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Verizon Wireless announced, or more aptly reminded small businesses that it has 2,500 retail stores just waiting to take care of their needs with special trained staff and resources. My SMB sensitivities make me pause: I’m not sure what to make of this reminder.

The good: Verizon Wireless continues to place more and more emphasis on SMB markets as distinct from large enterprise and consumer markets. Yankee Group has long researched SMB markets using the four critical SMB business needs as our overarching framework. All technology solutions must address at least one of these business needs, and the best can address all four. This Verizon announcement recognizes SMBs’ needs for external support – the fourth SMB business need. Knowing SMBs don’t have deep internal resources they must rely on trusted advisors and partners to help with many tasks, some of which are technology and IT related. Verizon Wireless stores and their staff provide such support.

The bad: Retail channels are not conducive to creating deep, rich relationships between small businesses and technology vendors. In an applications-centric mobility world, will Verizon Wireless expect a small business owner to drive to a retail store when having an integration problem with their in-office unified communications (mobile and fixed voice, video and data) solution?

Verizon needs to create unique value propositions of each of its channels to the SMB. We understand the value a strong company-owned retail channel brings to Verizon, but what’s good for the consumer goose isn’t always good for the SMB gander. Other technology vendors rely on and publicize the unique value of all their SMB channels for sales and support, recognizing that SMBs choose between channel outlets based on the business challenges they face at a given time. For example, sometimes an SMB will seek support/sales at a retail store or via DMR. Other times the same SMB might need a VAR/agent for on-premises sales and support.

The otherwise: Verizon Wireless has not crafted a coherent, primary research-supported story to convince me of their deep understanding of the SMB mobility market. SMB marketing is a skill and art form requiring the careful matching of solutions, segments, market messaging and channels. They need this story so they can better articulate their message to stakeholders in the SMB ecosystem – a large ecosystem including retail store employees, big-box retailers, indirect channel partners, application development communities, Verizon OSS/BSS resources, Verizon network operations, Verizon online resources and SMB customers/prospects. IT vendors like Cisco have grappled with this process. And most recently forward-looking MSOs have been engaging on this same issue as they contemplate their wireless SMB strategies.

Kudos to Verizon Wireless for putting more resources behind their SMB efforts. We look forward to a wireless industry invigorated with SMB success.

Remember that scene in the The Graduate, where the older guy whispers in Dustin Hoffman’s ear? He’s revealing where future riches lie. What he says is: “Plastics.” Not a bad steer in 1967.

Today, the word in your ear is - wait for it - interconnect. Wikipedia claims that interconnect is the “physical linking of a carrier’s network with equipment or facilities not belonging to that network.” Oh yawn, right?

In fact - as a raft of CTIA Wireless and VoiceCon-linked announcements from Cisco, GSMA, Telcordia and others underscore - our industry’s current and future revenues critically depend on supply-side ‘interconnect’ mechanisms that go far beyond physical network infrastructure.

Although superficially fragmented, the crowded landscape below needs to merge fast to monetize the much-touted benefits of hyper-connectivity.

Read the rest of this entry »

Rumors of Google buying micro-blogging site Twitter resurfaced yesterday. A claimed $250 million in cash is on the table, half what Facebook offered last year (although much of that was in stock).

If true, Twitter should hold out for more. Even half a billion looks cheap. Twitter offers a credible double whammy in social networking: It appeals in both personal and business contexts - and is furiously addictive. Indeed, I’d argue that Twitter is becoming more of a business tool than one for friends.

Only this week, Vodafone UK unveiled a new Twitter text service - it’s free for now, but will be charged within subscribers’ text bundles in future. “Twitter is the messaging network you didn’t know you needed until you experience it over SMS,” said Kevin Thau, Twitter’s director of mobile business development in the Telegraph newspaper. How very true, says @cmendler.

Perhaps the rumors are related to the brain drain to Twitter. Douglas Bowman, a senior Google visual designer, recently left to become Twitter’s creative director. Google’s CEO Eric Schmidt also denied plans to acquire Twitter. Speaking on the Charlie Rose show, he preferred to focus on plans to disintermediate traditional broadcasting models. Well, we knew that already.

What Google is now realizing is how quickly it too can be disintermediated as a search medium. Travelling along Twitter’s navigational paths and eddies also enables the type of lateral thinking that Edward de Bono has made famous. Interestingly, he’s claiming that’s also what society needs to get out of the global financial crisis (note to self: How many G20 leaders are Tweeters?)

Yet as tweets insinuate themselves into the fabric of our personal and business lives, things are going wrong. Tweet traffic overload is a frequent and frustrating problem. More horsepower - like Google’s hydro-electric powered datacenters- is just what’s needed.

The information communications and technology (ICT) marketplace is on the verge of its most significant transformation yet and is poised to hit the $4 trillion mark worldwide by 2016. This transformation is shifting IT complexity into the network cloud, making it possible for the corporate experience to more closely reflect the consumer experience.

Yankee Group predicts that Anywhere IT will change the way people work, and dramatically reshape the enterprise vendor landscape. Even amid the current economic turmoil, Yankee Group analysts advise organizations to begin exploiting Anywhere IT now or risk losing a competitive edge.

Yesterday, Zeus Kerravala and I hosted a webinar where we discussed the impact of Anywhere IT, how it will transform the corporate worker and interactions with the extended enterprise and what companies should do today to prepare for this transformation.

The webinar runs about an hour: audio (mp3) and slides (pdf).