Predictions – Late Extras

January 4, 2011

{b}From Harry Small, Chair, Global Information Technology and Communications Group, Baker & McKenzie and SCL Fellow{/b}

{i}Is e-mail dying?{/i}

2010 saw the peak in growth of e-mail traffic. Does that mean that bane of professional people’s lives is about to stop? No. But it does, in my opinion, mean that we shall see a slow shift this year from that ultimate open network (the Internet-based e-mail system) to a series of more closed networks where people choose – or not – to interact with each other. The Facebook generation prefer to communicate with people they have verified through shared membership of closed networks; they also like the instantaneous nature of the network which lets them see whether a correspondent is online or not and what the correspondent has done with the communication.

I do not think that business will flock to Facebook: there is an increasing need for a strict division between social and business activities – a trait seen well beyond the technology space. But I do think that the business equivalent of the social networks, for example LinkedIn, will show a significant upturn in usage as many business people realise that the open nature of e-mail is something that has serious weaknesses as well as strengths. Business people may well start to focus their efforts on communicating with people they know, through closed, business-oriented, networks or through a new generation of extranet; rather than, as many people see it, spending excessive time and effort checking for new e-mails, frequently from non-trusted and irrelevant senders, every minute of every day.

{i}Thin clients have now arrived{/i}

About ten years ago there were widespread predictions that most business computing would be delivered through ‘thin clients’ – namely computers with minimal processing power on the desktop, relying on the processing power of servers and other high-powered technology to which the client was connected through a network. The problem with that was that the network in question, the Internet, was simply not up to the job of delivering rapid response time and sensible service levels for businesses to take advantage of the lower infrastructure cost of a thin client system. Now, the Internet, which seems to have changed its name by deed poll to The Cloud, can deliver the needed levels of connectivity and businesses are beginning to see the benefits of software running as a service on remote computers. Google’s movement into the business applications market – though not the only example – is one very prominent example of this.

What does this mean for technology lawyers? We have yet to work out the balance of the risk among the various stakeholders in this new model:

The user (will the business user accept lower service levels caused by the reliance on network communications in return for cheapness?)
The network providers (will they accept more money for guaranteed network service levels and bandwidth?)
The software and other service providers (how will they share the risk to entice customers?)

This is some serious homework for the technology lawyer of 2011.

{i}Some work for the Court of Appeal{/i}

In 2009, the English High Court decided (in {i}Internet Broadcasting Ltd v MAR LLC{/i} [2009] EWHC 844 (Ch)) that a standard, ordinary limitation clause in a technology contract did not apply, as a matter of construction, to limit a defendant’s liability for deliberate, personal, repudiatory breach of the contract. Many of us thought that that issue had been resolved in the mid 1960s when the House of Lords ruled that the doctrine of fundamental breach was not something known to English law.

The 2009 case means that there is a degree of uncertainty in the law as to the extent to which a limitation or exclusion clause will cover a serious repudiatory breach of contract. Uncertainty is a bad thing in the context of commercial law – especially where the potential users of English law as the default jurisdiction for commercial contracts are already nervous at the extent to which the Unfair Contract Terms Act can reopen freely negotiated contracts. The sooner the Court of Appeal reduces this issue to a degree of certainty the better. So technology lawyers should be thinking about the right cases.

{b}From Alastair Morrison of Strathclyde University{/b}

As others have forecast, the use of hosted services (SaaS) will increase relentlessly. However, just as open source software has not so much supplanted as supplemented what is offered by proprietary software, so many law firms will be reluctant to fully abandon on-premises products for cloud-based offerings. There is still an inherent (some would argue self-deluding) feeling of security and control that comes from keeping your own beige box(es) somewhere in your office. But it may be that for 2011 fence-sitting is not such a bad idea (and is certainly understandable) given that even the company around which most firms’ and individuals’ IT lives revolve, Microsoft, seems somewhat lacking in its desire, or perhaps ability, to embrace wholeheartedly the world of software online.
Microsoft’s SaaS ambivalence is perhaps best illustrated by reference to its Office (and Collaboration) suite. True, the company already boasts online productivity tools such as Windows Live services,, and Office Web Apps, and 2011 will see the release of ‘Office 365’, a cloud-based suite of Office server tools. But, whereas for some users the latest release will be a welcome complement to what is already online, for others it will simply add to their frustration because, although the familiar-looking Microsoft software is becoming increasingly available online (familiarity being especially important for organisations concerned about the training/learning time/costs), it lacks the seamless integration possible with an in-house installation. This disjointed approach will not change as long as Microsoft generates most of its revenue from on-premises software (so not for quite some time). It is part of a strategy: provide enough online to ensure that customers who are adamant about using hosted services will prefer Microsoft’s to those of its rivals, but do not create such a good online ‘experience’ that wavering firms and companies will be prepared to forgo the benefits possible from purchasing on-premises products. It is a difficult (and dangerous) balancing act for the company.
Beyond the company itself there are further indicators that 2011 will be a difficult year for Microsoft. For example, Wall Street’s diminished confidence in the company for 2011 due to disappointing results for tablet PCs and mobile phones in 2010. One can of course point to more successful endeavours, such as Windows 7, but desktop operating systems are not as important as they once were. So as with the online v. on-premises dilemma, the company struggles in new areas it must compete in, while finding its core competencies are increasingly less relevant. This situation will only worsen in 2011.
In summary, throughout 2011 the company will continue striving to maintain the huge revenue it garners from in-house software, while at the same time debating what it should provide online and how similar the online and on-premises offerings should be. Additionally it will struggle to develop a long term SaaS strategy in which it leads and set the trends rather than reacts to what its rivals are doing. All of this it will find increasingly difficult unless a similar cloud visionary to Ray Ozzie is in place and the markets are confident of Ballmer’s commitment to the organisation, or an equally strong leader takes his place to drive forward the traditional company strengths. 2011 should be an interesting year for the company, its users, and its observers!