Business users of older iPhones and iPod Touches could be in for a nasty surprise if they decide to update to the latest OSX for iPhone 3.1.

The point release - which is supposed to improve security, reliability and fix bugs - also stops all devices older than the brand new iPhone 3GS from accessing some Microsoft Exchange 2007 servers, according to reports.

Users are telling us that after installing the update, a message informs them: "Policy Requirement - The account [account name] requires encryption which is not supported on this iPod/iPhone". Although the encryption policy is a server side option, thousands of users have been successfully syncing to these servers for many months without problem.

Which leads us to conclude that Apple devices have been misleading Exchange servers into thinking that they are capable of carrying out the level of on-device encryption demanded by their system administrators, when they quite clearly are not.

The fact that Apple has been loudly extolling the virtues of the iPhone as a business class device while potentially compromising the security of companies all over the world is beyond irony. And any business that has decided to offer Apple devices to its employees for use with Exchange 2007 servers will now have a major headache to deal with.

The immediate solution seems to be either to turn off the need for on-device data encryption - which as anyone who has ever lost a mobile phone will agree is an entirely bad idea - or to upgrade every one of your iPhone-toting employees with a shiny new 3GS. Which is very nice for Apple's iPhone shipments and will make for some happy employees, but does nothing to improve business bottom lines in such troubled times.

The only other option is to 'downgrade' to OSX for iPhone 3.0. All very well if you know what you are doing and a) have a suitable iTunes-recoverable backup, b) use Time Machine and are happy to revert your entire system to a previous state or, c) are willing to install a backup from a dodgy P2P or Usenet download.

It's not clear whether these older devices are capable of offering data encryption and can be fixed with a further update, as Apple is remaining tight-lipped about the problem.

But unless the Cupertino company wakes up and smells the cappuccino, it will do untold damage to the fragile relationship it has built with the few companies brave enough to dip their toes into Apple iPhone waters.

With much of the marketing surrounding the release of Snow Leopard relying on promises of Exchange support out of the box, we have to wonder whether Apple has betrayed the trust of business users once too often.

15 Sep 2009