I can understand the frustration being directed towards iTunes. Most decidedly when you are managing multiple Apple device and a mixed set of users on a single home PC! Then it gets extremely confusing! When a person finds themselves in this painful, data loss dilemma, the primary disappointment and focus has to be on the odd role Apple originally and mistakenly designed iTunes to have in the ownership of all phones marketed by Apple!
Apple originally designed the iPhone (like the iPod) as a "Companion devices", meaning they expected you to own an additional computer (say, a Mac) in order to use the phone effectively. Apple didn't even launch an "App Store" for the iPhone for another year after the phone was released.
Apple had benefited handsomely over the years with the success of the iPod, when it managed to draw 100's of thousands of rather unwitting, home based, computer users into their stores; who desired to do little more than surf the web and write occasional e-mails. These visitors became excellent converts to Apple's line of Mac and Macbooks.
It's no wonder Apple expected the iPhone to help establish even more future Mac ownership. As a result, they never saw an issue with creating a device dependant (or companioned) to yet another Apple purchase. In their eyes, this dependency just made good business sense. But like a lot of Apple policy's and marketing, it doesn't make good, ultimate, consumer sense.
The only changes we have luckily seen thus far to this "locked down", limited approach; which Apple notoriously controls it's "loyal" consumers through; occurred in large part due to the (ensuing) introduction of the Google Android phone.
Google introduced a device which depended solely on the internet and exploiting Google's own, free cloud from day one. Unfortunately, Apple has repeatedly been beaten over the decades at its own game, due to its (Steve Jobs) stubborn addiction to control and exclusivity. Consumers just don't ultimately want such uninvited, and unneeded restriction.
The Android line of products doesn't use (or expect) ANY additional computer. EVERYTHING is automatically backed up "in the cloud". And automatically restored or transferred to any new device or recovered device the moment you type in your Google cloud credentials. (A simple user name and password.)
Apple has now attempted two failed solutions at solving this initial and typical, flawed, "companion device", philosophy. To get beyond the companion requirement they first introduced, a $99 per year options called Mobile Me, They failed miserably, and the project is known as one that Steve Jobs directly met with the head developers over, scolding it's usage methods and lack luster popularity. Now iCloud is proving to be Apple's latest misunderstand as to how to utilize the internet seamlessly and offer its customers flexibility and power as well as peace of mind.
iCloud would be much more accurately named iSync, since it offers no real Cloud based features, power or applications to speak of. Alternatively, it attempts to serve as the go between resources for "syncing" all your devices via the internet. Luckily, since most iPhone users are newcomers to the Smartphone world, most just don't know what they are missing when it comes to good, powerful, transparent uses of things like connectivity and cloud based storage and applications.
Even old Windows Phone users have seen such advantages executed exceptionally, over 7 years ago; with things like MS Server Enterprise integration. Here Apple is flush with cash, but they still can't even come close to hitting this nail on the head. And historically speaking Apple has never been able to maintain ANY services or product lines which utilize and depend on enterprise (much less cloud) level solutions.
A seamless syncing and backup solution which require no thought, additional software, annual subscriptions, activation or learning curve has been a base feature on any and all Android based, Google devices since their introduction to the market. This type of data backup is simply automatically initiated to the Google Cloud, where it can then be accessed, downloaded or edited at will, via any internet browser.
This is one of the many reasons Android phone far out sale iPhones. This and the value comparison of the handset cost (including, required, long-term, contracts) versus hardware offerings. (Not to mention the higher cost of Apps; with much lower percentages paid to the developers; and highly restricted outlets for media, books, music, movie, etc..) However, since Apple iPhones are typically their consumers first smart phone, (most folks owning them previously used a Motorola Razors, at best.) iPhone typically has a very loyal following with these folks new to such convergence. So once such leaps and first steps are taken towards a Smartphone platform, few folks would consider braving or learning yet a 2nd "smart phone", after making their way to their first.
Additionally, Apple sets up their ecosystem in such a way that a user must feel vested towards their branded hardware or risk losing many of the costly purchases they made over the years in order to populate their phone with useful media and software. Such exclusivity and "closed architectures" are often referred to as "walled gardens". Apple is the king of such consumer manipulation. (This is also the contributing reason smart group like MIT and other's are now abandoning their iPhone and iPad app development efforts, in favor of platform agnostic solutions such as HTML5. Read more: http://goo.gl/edhoi )
Attempting to control and restrict consumers is the biggest culprit for Apple's lack of overall PC success in the 90's. Such restricted practices have typically limited Apples ultimate market share to less than 15%, often closer to 8% of an overall sector.
For the folks who have spent over a decade depending on countless generations of "smart phones" and portable, touch screen devices for many years, prior to Apple's re-emergence in the market; we expected a device to work well, be able to multitask, be able to surf the entire web; and from the experience of past smart phone app purchases; avoid any "wall garden" methods of restricting users where related to media purchases, app purchases, available stores, etc...
Most of us long time Smartphone users have seen the competitive advantages of 3rd party app stores like Handago (a.k.a.) Pockectgear (which had over 200,000 apps by 2008, long before Apple store had any presences.) as well as Handspring, Mobihand, etc.. In addition, folks have had many more years of utilizing repositories and resources such as Palm Software Connection, Win NT "Channels", Firefox "Add-Ins", etc., the list goes one.
There are vast legions of folks with broader experiences using portable consumer electronic devices and mobile computing, which create a much more discerning audience than is typical for average retail consumers. Admittedly, their knowledge was typically subsidized by generous company budgets or other business related demands. However, those same average consumers whom have flocked for the moment to Apple, are very fickle; and eventually jump to whichever ship they feel offers them the most choices and the best value. Keeping in mind, a huge percentage of recent Smartphone converts were using simple Motorola and Nokia feature phones just a few years earlier.
The real key to attracting these folks is simply to get the initial price point below any sticker shock the average buyer just won't stomach. This price point for years has been near or below $200-$250. Typically if you ventured beyond this point, many consumers would simply look at a cheaper solution.
In addition, since many devices utilized over the year by veteran smart phone users were not subsidized by large phone carriers; most veteran users understand how to look past the cost of the phones when signing long term contracts, and make a better / real hardware value comparison. When a carrier in turn tacks a HUGE premium, long term service commitment and data charge, (or other steep minimums were related to text and voice,) you know right away, they are trying to position a phone or device for the more naive buyers, in order to gain their acceptance and perceive it as a cheaper and a better value than it is.
This relationship between a company, selling an expensive device, and a carrier willing to subsidize far more than the industry norm, is the primary and brilliant initiation which has lead to Apple most recent success. And in this case ATandT even paid Apple a fraction of its monthly service revenue for every iPhone subscriber (until the iPhone 3G) which had NEVER been offered. Consumers' getting more than they paid for, is the best perception (directly understood or not,) you can create for new and peer pressured customers. ...consumer demand and perceived value of the device eventually went viral.
An odd but predictable opportunity for an innovative device costing, at time of purchase, nothing more than the magical number of $249.00; despite its initial limitations. After all when the 1st phone was introduced, it had no App store, no video recording (only stills), no multitasking, (like an ability to run Pandora while you read a book; or listen to music, in the car while it GPS navigates, etc.), no ability to populate your device with anything, Music, Movies, additional applications, etc., without the use of a full blown computer. You had literally bought at App Launcher with no convenient way to get new apps, and no real selection of Apps to speak of. But Apple Fan Boys rarely ask such questions, ...initially.
These handicaps and additional long term cost; as well as large upfront investments, were never even considered by the average consumers and initial fans; all of whom were anxious to use what was being touted as the latest and greatest innovation. Unfortunately, it was also a platform riddled with typical, technical, industry newcomer, launch and platform issues; beyond that of the value shortcomings.
Apple would soon learn how tough the competition in this crowded marketplace was, and how hard it was to make a device which primarily needed to function as that of a phone and a 3rd party app launcher; supporting software written almost entirely by third parties (and Apple is never good at relinquishing control or fairly inviting others to participate and/or profit on their platforms.)
Just the basics of utilizing cellular radio technologies for data transfers and reliable voice communication not to mention well maintained reception have all proven to be hurdles very difficult for a software company, turned consumer electronics firm with no in house experience testing or proving anything more than a few PC models and a music playing device.
Thank goodness for Apple, loyalty, cult following. Luckily there is a subset of about 8% of the consumer electronics buyers who simply feel Apple can do know wrong with their money. Many others end up learning the hard way, this is simply not the case. :-(