Dramatic reversals of business fortune are a reminder that the constants of commercialized life (in my view, we’re almost all of us living highly commercialized existences) aren’t quite as untouchable as we thought. The concept of “too big to fail” is under siege at the moment. The fact that a company, product or service is so clearly dominant and relied upon is no guarantee of its survival.
In particular, I make this point in regards to Web applications, cloud computing, putting your data online — whatever you want to call it. Over the past decade, consumers have been relying on Web-hosted services to house their information more and more, and on independent stores of data on their personal computers less and less. Forget PCs even. It’s no secret that vanishingly few people are relying on personally maintained copies of records that exist in the home, like say a checkbook register, too.
Many of you reading this right now probably rely on some form of Web application for your email, spreadsheets, word processing, finances, or even to run your business. And that’s just the productivity side: think for a moment about all of the value you’ve created in the social networks you’ve built on say LinkedIn, or the narratives you’ve weaved on Flickr, or the conversations you’ve had on Facebook, or the journaling you’ve done at Tumblr. It’s almost all online, and very little of it is on your computer.
Fair Weather Finances
In optimistic financial climates, trusting the cloud seems like a fine idea. The fact that many small businesses store their mission critical project information in a tool like Basecamp makes a lot of sense because the good folks at 37signals have demonstrated themselves to be reliable and trustworthy keepers of that data, even as (or especially as) their business has grown exponentially. Consumers who manage their personal finances through a tool like Mint are reassured by the strong venture backing and public support standing behind those startups. And if you do anything using Google Docs, there’s good reason to feel secure too — their size and future seem soundly protected.
Just consider a moment though: today’s market capitalization for Google stands at the robust figure of US$107 billion, which few would argue qualifies as ginormous. On the other hand, at the time of its failure, WaMu was said to have US$307 billion worth of assets on its books. And still the bank collapsed.
In my view, it’s a given that some of these Web businesses will fail. Personally, I doubt it will be Google, but after watching trillions of dollars of wealth vanish in the market over the past several weeks, I tend to doubt Google’s potential for implosion a little less today than I did six months ago. As for smaller players, who knows if they will survive or not? The size of a company is certainly not a reliable shield against failure, but being small doesn’t necessarily guarantee a company will be around in the long term, either. I just don’t think that it’s realistic to assume that all of the data we’re storing online is safe. So a friendly reminder: back up.
Make Note of the Exits
Rather than just coming off as an alarmist, I want to add a few constructive comments to this dire warning. Part of this situation has very much to do with software architecture: these applications should be designed to allow users to mirror their data on their personal computers, ideally in open formats. I’m not just talking about an option to export one’s data to an archive file, though, but rather about true, seamless mirroring. For instance, I pay a company to store my mail on the cloud, ostensibly, but I have no more or less trust in their longevity than I do in any other online business. Through the underestimated miracle and beauty of IMAP though, all of my messages are also mirrored on my hard drive, an invaluable insurance policy against the sudden disappearance of my mail server or host provider. To me, the IMAP approach is really the ideal approach, and I really wish it was a model for more Web services.
My other idea for mitigating cloud computing risk is a little touchier and will undoubtedly raise some hackles, so I’m just going to come out and speak its dirty name: government regulation. Part of the reason that WaMu’s failure didn’t ignite a run on the bank (or indeed, on all banks) is the (hopefully) concrete reality of the Federal Deposit Insurance Corporation. For most intents and purposes, the money in WaMu customers’ accounts was protected by the U.S. government — not just by the fact that it was insured, but also by the fact that, in order to qualify for the insurance, WaMu had to follow certain regulations in its management of money.
Data is almost as good as money, but I don’t know of a single consumer Web application where access to data is guaranteed by a third-party private entity, much less by the government. By no means am I begging for government regulation; doing so has the potential to undo the innovation equation that defines the digital age. Personally it’s my view that that way lies madness. But so too does the path of inevitable failure that we’re on. Essentially, as consumers of cloud computing, we have virtually zero recourse, to say nothing of insurance. It’s something we should be thinking about and talking about more explicitly as we continue to move more and more of our lives online.
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