As the news broke yesterday about Microsoft's failure to protect the data of some Sidekick mobile phone users, the temptation to blame the whole concept of cloud computing was too great for many. Chief information officers tend anyway to fall into the camp of "if you want something run right, run it yourself." For many of them, the notion that you would let someone else provide your critical business technology infrastructure "as a service" is mind-boggling. You can't see it. You can't operate it. You may not know who provided the component technologies from which it's built. And you can't always do much to manage it.

So why would you venture into cloud computing? Answer: Because it's cheaper to operate. It's easier to scale. It's faster to provision. And you don't have to find, hire, manage, and retain increasingly expensive technical talent to run it. It really is the better model — until, that is, that critical infrastructure suddenly isn't there any more.

Today's infrastructure-as-a-service providers know that they have to be continuously available. I've read my share of service level agreements and all of them give guarantees that they will always be there (although the fine print often admits that they will merely do their best). Their engineering teams use well proven, high-availability designs. Their operations teams monitor the infrastructure continuously and try to anticipate situations that would take them off the air. They have redundancy, excess capacity, backups, and backups for the backups. Their reputation depends on it.

So why do we have a continuing pattern of service outages in "the cloud"? This week's Sidekick meltdown is no outlier — given the glitches already experienced with Google's Gmail, PayPal, SalesForce.com, it's safe to assume no one is immune.

I see four reasons:

1. It's new. This approach to infrastructure is still evolving quickly, with early providers still discovering and working out bugs.
2. It's software dependent. We still depend a lot on software — which is far less reliable in practice than the hardware it runs on, requires frequent patching and updating, and is a bear to manage at scale and high levels of complexity.
3. It's experimental. We are all, to some extent, dabbling in infrastructure as a service and (remember this) experiments sometimes fail.
4. It's big. Our existing tools were built for much smaller scale of operation in much less heavily tenanted environments.

The first three conditions wouldn't be so troubling if it weren't for the fourth. Consider that if you do something dumb in your in-house infrastructure, you only hurt yourself. If you make the same error in the cloud, you can take down a lot of your invisible co-tenants. Application designers haven't learnt to think that way yet.

Cloud computing is still the shape of the future. The infrastructure as a service model has too much going for it to retreat, and momentum will only build as more companies spot the clear economic potential.

For the moment, however, early adopters should keep their eyes open about the risks. Understand that you're sharing a journey of discovery with the providers — and plan accordingly.

John Parkinson serves as chief technology officer for one of the world's largest credit bureaus, and writes frequently on the effective management of information technology.

Amazon's Kindle e-reader cannot be manufactured in the U.S. and that's a cause for concern.

Even though the Kindle's key innovation — its electronic ink — was invented and is being made, at least for now, in the U.S., Asian manufacturers are capturing the vast majority of the value added by manufacturing the e-reader itself. Even more worrisome, the U.S. is almost certain to lose control of the e-paper display technology and the future innovations that spring from it.

Amazon designed the Kindle in California and one of its key components, its "ink" (the tiny microcapsule beads used in its electrophoretic display), were designed and are being manufactured by E Ink, a company based in Cambridge, Massachusetts. But the majority of the value added in manufacturing the rest of the unit is being captured in Asia.

The market research firm iSuppli estimates that the Kindle's total manufacturing cost is $185. The most expensive single component is the $60 display, which Taiwan's Prime View International is manufacturing. The display consists of E Ink's special beads and a sheet of glass that has a patterned layer of silicon transistors on it that turn the beads black or white when a voltage is applied.

E Ink had to have the glass made in Asia because the companies there are the only ones that can deposit patterned silicon on sheets of glass. That capability left U.S. shores when American companies failed to keep up in the LCD flat-panel-display industry.

How is the $60 value of the display divided among the electronic ink, the glass/silicon substrate, and all the processing? That information is not public, so I don't really know. But I do know that a sheet of low-temperature polysilicon with transistors costs $20 to $30, and other processing steps, including the application of the beads to the glass, cost something as well.

All this suggests that E Ink's beads account for no more than half of the value of the display, which raises the question of whether E ink could earn a sufficient profit from manufacturing just the beads to cover its R&D costs for developing the whole display. E Ink's ongoing effort to sell itself to Prime View suggest that the answer is no.

The next most valuable component of the Kindle is the wireless broadband data module, which is supplied by San Diego-based Novatel Wireless and is made in Korea. iSuppli estimates its value is $39.50, an amount that includes a $13 Qualcomm CDMA chip that is also manufactured in Asia. Though chips like this are still designed in the U.S., the vast majority of them are manufactured in chip foundries in Taiwan, Singapore, and China, and then packaged somewhere in the region. Probably about $20 of the $39.50 goes to the U.S. companies.

The Kindle contains a microprocessor chip supplied by Austin, Texas-based Freescale Semiconductor whose cost is $8.64, according to iSuppli. I don't know where that chip is being made, but all the other electronic components, including the lithium-polymer battery, were designed and are being manufactured in Asia, where the capabilities reside thanks to its strong consumer-electronics industry.

Of the total cost of $185, perhaps $40 to $50 is captured in the U.S. Is that a problem? After all, Amazon seems well-positioned to capture most of the value of the Kindle (the difference between the product's wholesale cost and retail price) and a healthy portion of the profits generated by sales of e-books to Kindle owners. In addition, the Kindle's wireless data service, which uses Sprint's data network, resides in the U.S.

So why does it matter if the Kindle can't be manufactured in the U.S.?

One reason is importing products like the Kindle will contribute to the U.S. trade deficit. Manufactured goods, especially high tech products, have a high value-add. I suppose we can export soybeans and oranges, but it takes a lot of soybeans and oranges to pay for a Kindle.

But a more substantive cause for concern is when innovations can't be manufactured in the U.S., the locus of innovation in that area frequently shifts to the countries that can manufacture them.

Even though the electrophoretic beads were the central innovation in the Kindle, E Ink's inability to control the low temperature polysilicon and the fabrication of the display meant that it could not perform the system integration required for it capture the majority of the value add. This inability undoubtedly is one reason E Ink couldn't remain independent. Assuming the deal with Prime View goes through, I will not be surprised if Prime View ultimately moves E Ink's bead production and R&D to Asia.

The more worrying thing to me, though, is the likelihood that by not manufacturing the electrophoretic display, the U.S. will miss out on the future industries that spring from it — things like large flexible displays, future generations of electronic signage, and plastic electronics. Those technologies could, in turn, spawn other innovations and new industries.

Years ago the U.S. lost the vast majority of its infrastructure, or "commons," in precision optics to Japan. The Japanese used those capabilities to grab the lead in producing lithography tools for semiconductor manufacturing, which, in turn, drove most American semiconductor manufacturers out of the DRAM business. The Japanese also employed those capabilities to expand into lithographic tools needed to manufacture flat panel displays. This same story has played out in high tech industry after high tech industry.

The lesson: Sometimes when you let your capabilities get away, you give up not only one industry but all its progeny.

Willy C. Shih
Professor of Managment Practice
Harvard Business School

People often tell me that those who work for nonprofits should work for less because of the psychic benefits of being able to make a difference, work with the poor, and so on. The notion is a red herring. And that's putting it kindly.

Do these people really believe that no one makes a difference in the for-profit sector, and that there is no psychic benefit associated with careers there? What about the people at drug companies working on cures for disease or the people who build the Toyota Prius and the Smart Car? What about the people who publish The Grapes of Wrath, distribute the cell phones that are revolutionizing Africa, or build the iTunes University software that brings Ivy League lectures to people at all socio-economic levels all over the world? Not to mention the less sexy industries that make it possible for us to heat our homes (and our charities), power our lives and eat.

Many people in the nonprofit sector never get to visit a village in Africa or treat a sick child. They work behind the scenes in cubicles, they file files, they beg donors for money, they sit in interminable departmental meetings &#8212 just like employees everywhere. They're far removed from the psychic benefit that's supposed to substitute for half of their paycheck.

Most nonprofits are small and starved for capital, preventing employees from fully capitalizing on their personal potential. Nearly every good idea is met with a dearth of resources, a prohibition on taking risk, or a broken donated computer. Whatever psychic benefit that theoretically might have accrued from putting those good ideas into action is outweighed by the grind of shoestring budgets and overstretched systems that is the reality.

In 2003 BusinessWeek surveyed the compensation packages of MBAs 10 years out of b-school. The median compensation package with bonus was $400,000. By contrast, the average 2004 salary of the CEO of a $5 million-plus health charity was $232,000 and of a hunger charity, $84,000. There's no way you're going to get people with a $400,000 annual pay package to take a $316,000 annual pay cut on the basis of the psychic benefits that await them.

Instead, consider the enormous psychic benefits that people in the for-profit world enjoy as philanthropists. Think about this: It's cheaper for the MBA to donate $100,000 a year to the hunger charity than to go work for it. She gets $50,000 in federal and state tax savings, which leaves her $266,000 ahead of the game. On top of that, she gets a seat on the board of the hunger charity; indeed, probably chairs the board. She now gets to supervise the poor bastard who's running the hunger charity. She gets to dictate his strategy and how he goes about executing it. And if that weren't enough, the MBA is now elevated to the status of respected philanthropist in the community (while the hunger charity CEO gets demonized at the annual board meeting for wanting a $10,000 salary increase &#8212 "shame on you, that money could be going to the needy," they tell him). And, with a $100,000 annual contribution to the hunger charity, at some point the "philanthropist" gets her name on the top of the charity's headquarters. And maybe she loves her for-profit job on top it. Sounds like an awful lot of psychic benefit to me.

Don't fall for this Puritan self-sacrificial psychobabble. It's not the poor who are asking you to work for less. It's the donating public, including many a wealthy donor. They're asking you to end poverty and every other great social problem and to do it for them at a discount. And they're exploiting the images of the poor to get you to agree. The fact that someone makes a one-time sacrificial gift doesn't mean you're obligated to make a lifetime sacrificial career choice. If you do the math and the psychic benefit comes up lacking for you, then ask the people who want you to make the world a better place for another kind of benefit that begins with a "p." Pay.