Not everything will move into the cloud, but the cloud will move into everything.

Kinda like the sound of one hand clapping, don’t you think?

See what the Amazon SLA offers:

we commit to 99.9% uptime, measured on a monthly basis. If an S3 call fails … this counts against the uptime. If the resulting uptime is less than 99%, you can apply for a service credit of 25% of your total S3 charges for the month. If the uptime is 99% but less than 99.9%, you can apply for a service credit of 10% of your S3 charges.

Sounds great, doesn’t it? Let’s calculate “99% uptime,” which is the same as 1% downtime. A month has 43,830 minutes, so your site will be down 1% of that time, 438 minutes, or over 14 minutes per day on average. Suppose just 14 minutes of downtime occurs during your daily peak period. How will that downtime impact your revenue? Will being able to “apply for a service credit of 25%” compensate you for lost income, troubleshooting time, and unhappy customers?

Now consider the worst case of having all 438 minutes of downtime occur in one big failure during, say, the peak selling hours of the day after Thanksgiving. Then what recourse do you have? The dirty little secret is that the SLA protects the infrastructure provider, not the customer.

Amazon’s 99.9% uptime commitment means average daily downtime of 1.4 minutes. To put this statistic in perspective, I hosted a website for family and friends at a data center that, according to my measurements, delivered slightly worse than 99.9% uptime over a 3 month period. The number of complaints I received and the time I spent dealing with downtime astounded me. Do you think the infrastructure provider graciously provided me the 100% refund to which I was entitled according to its generous SLA? Think again.

I would have been fired for delivering 3 months of 99.9% availability back in the 1980s when I managed a corporate data center.

Web SLAs today are no better than the “9/90 warranty” my father offered years ago on his used car lot. If you shopped carefully, you could buy an awesome car at my dad’s store, but the warranty was only good for the first 9 seconds or 90 feet, whichever came first.

But money can still buy happiness. By filling out a simple form and paying a mere $720 annual fee to FlightAware, you can conceal your plane’s whereabouts from the prying eyes of the site’s users. How nice of FlightAware to provide this helpful service. They didn’t invent the hush money business model, but they’ve certainly done a great job translating it to Web 2.0.

I wonder how long it will take government to catch on to this. After all, you can look up on the local property tax site the value of my neighbor’s house and even the size of her swimming pool. The tax man could easily whip up a form that would shake me down for a pretty penny to remove data about my house from the tax site. Ain’t Web 2.0 grand?

Credit for coining alpha geek goes to Tim O’Reilly. In an insightful 2002 essay Inventing the Future, he defined the term as:

hackers who have such mastery of their tools that they “roll their own” when existing products don’t give them what they need.

Although the meaning of hacker is ambiguous and controversial, I’m sure O’Reilly intends the flattering “expert programmer” sense:

one who knows a (…) set of programming interfaces well enough to program rapidly and expertly. This type of hacker is well-respected (…), and is capable of developing programs without adequate planning…

O’Reilly asserts that alpha geeks provide early radar and valuable insights into the computer industry’s future:

The alpha geeks are often a few years ahead of their time. They see the potential in existing technology, and push the envelope to get a little (or a lot) more out of it than its original creators intended. They are comfortable with new tools, and good at combining them to get unexpected results.

What we do at O’Reilly is watch these folks, learn from them, and try to spread the word by writing down (or helping them write down) what they’ve learned and then publishing it in books or online.

This is brilliant strategy for O’Reilly Media, whose main business is publishing for geeks. As customers and suppliers, geeks constitute a large part of the O’Reilly ecosystem. Promoting alpha geeks as an elite class makes great sense. O’Reilly can hire the best of the elite to write books, lead online communities, and speak at conferences. The elite will feel smug and customers will guzzle the media. It’s a win-win proposition: harness collective intelligence to tap the mother lode of IQs above 140. Get the crowds to do the heavy lifting.

But how much value does this strategy provide for those outside the O’Reilly geek ecosystem? Less than meets the eye. Let’s analyze the value from investor, executive, and non-geek consumer perspectives.

Do alpha geeks provide useful radar for investors? By starting a venture capital fund, Tim O’Reilly thinks so. No doubt he has enjoyed a modicum of success in alpha geek ventures. Other venture capitalists (VCs) seem to be steering clear of the geek space, as evidenced by their limited participation in O’Reilly conferences. Simply put, if alpha geeks were such hot stuff, wouldn’t VCs be crawling all over them at conferences? I haven’t seen any VC swarms and below I present several reasons why not.

Executives know that customers, not geeks, drive their business. Alpha geek skills may occasionally help further specific objectives in the enterprise. But from a Fortune 500 CIO’s perspective, most geek behavior, and especially that of the alpha variety, is foreign and unwelcome. What’s more, the geek’s penchant for “developing programs without adequate planning” conflicts with the emphasis on teamwork that prevails in successful IT shops. In short, alpha geeks are viewed as nothing more than a necessary evil in a large corporation. (Google may be an interesting counterexample.)

Consumers desire cool products like iPods. Do products of such scope and scale spring straight from the minds of geeky individuals? Nope (again, Google might be an exception). Almost any large technology project requires substantial resources, processes, and value networks. Geeks say, “leave me alone and I’ll write the code.” In my experience, a good product or invention is a necessary, but insufficient, condition for success. Standing alone, few alpha geeks possess the full range of skills to deliver sophisticated products to a consumer audience.

What’s the outlook? The alpha geek meme will behave as an economic bubble, comparable to 17th century tulip bulbs. Thanks to Web 2.0 mania, alpha geek skills are overvalued, but the likely upcoming economic recession will bring the value down to earth. Lacking strong strategies or business models, many alpha geek web 2.0 ventures will fail, just as web ventures perished when web 1.0 crashed. The alpha geeks will crash and burn along with those ventures.

Are you feeling lucky? You could bet against this prediction by starting your own geek venture fund as O’Reilly did. Just don’t call on me to invest.

Let me tell my company’s story. To save money on software licenses, we replaced all our Windows servers with SUSE Linux (now Novell SUSE Linux Enterprise) five years ago seamlessly and without skipping a beat. Emboldened by that success, I switched my office desktop computer to SUSE Linux, but the pain was excruciating. For over two years, I had both a Windows laptop and the Linux machine on my desk, and, until recently, the Windows laptop was the one I mainly used. Gradually I did more of my work in the Firefox web browser, so I needed the laptop less. By adopting Web 2.0 tools like Writely (now Google Docs and Spreadsheets), I discovered I didn’t need most of the “bells and whistles” of Microsoft Office. Still, my Linux desktop machine simply couldn’t do many things as well as Windows, especially anything involving audio and video.

My desktop environment took a quantum leap when I installed Ubuntu Linux about four months ago. After a bit of customizing, Ubuntu is reliably doing everything I need. The Windows laptop is off my desk. I can’t say I’ll never use Windows again, but now I’m getting most of my work done in Linux and Firefox.

Why did I suffer the pain of migrating to Linux? Mainly the reasons are cultural: Gate is a small firm and we pride ourselves on doing things simply and efficiently. We don’t see the point of buying and reinstalling the same basic functionality again and again (for example, Office 97, Office 2000, Office XP, Office 2003, Office 2007) when we can get it at no cost. For us, the switching costs are not very high because our workforce is highly computer-literate and flexible. I wanted to see whether the gain of escaping Microsoft lock-in was worth the pain of migration to Linux. Thanks to the web, the pain is no longer intolerable.

Let’s go back to the industry view. A key trend in Web 2.0 is AJAX applications replacing their desktop counterparts. For example, two years ago, you couldn’t edit photos in the web browser. Now, Snipshot enables easy web photo editing and Adobe will soon deliver a Web 2.0 version of its flagship Photoshop. As more and more Web 2.0 applications need only the web browser on the desktop (or PDA, or phone), we all become less dependent on the Microsoft technology ecosystem. Companies that deliver Web 2.0 server infrastructure will gain traction in low-end applications and traditional desktop software providers will move further up-market. After all, the web version of Photoshop won’t do all the high-end effects and image manipulations that Photoshop CS3 on the desktop will do.

The Photoshop scenario is a perfect example of disruptive innovation. As new players enter a market, initially they satisfy the needs of less demanding customers (like me). Gradually, their products improve, starting to meet the needs of mainstream customers. Well-entrenched incumbents (such as Adobe and Microsoft) then move to higher ground. Of course, the incumbents try to compete with the new players, but competition isn’t easy because the incumbents’ corporate values and partner networks aren’t optimized to conquer low-end markets. We saw the same scenario years ago when Microsoft attacked Novell’s NetWare and we all know who won. In the face of Web 2.0, Adobe is fighting by introducing the advertising-supported Web Photoshop. But they are fleeing to higher ground by introducing Photoshop CS3. Microsoft is doing likewise with Windows Live, Vista, and Office.

As the WSJ article mentions, two big Microsoft partners, Hewlett-Packard and Dell, are talking to customers about better Linux desktop support. Such conversations would have been inconceivable two years ago, but the potential of Linux adoption on enterprise desktops will affect hardware vendor strategies. So we are seeing the first cracks in the hardware partner network. Changing alliances often signal disruptive innovation and changes in industry values. Watch that space.