Calculating the true cost of cloud outages

Before moving to the public cloud, you should figure out exactly how much money inevitable outages will cost you had an outage for 49 minutes on Jan. 31, and it cost big -- more than $4 million in lost sales. I'm sure many in the cloud computing community where thinking, "Now you know how it feels."

According to Network World's Brandon Butler, "Amazon officials have said that the biggest customer of the company's cloud division -- AWS (Amazon Web Services) -- is AWS has experienced a variety of outages during the past three years, but usually the retail site is not impacted." For example, an EBS (Amazon Elastic Block Storage) outage in October 2012 affected such customers as Reddit. Moreover, an outage on Christmas Eve 2012 brought down Netflix, but not the video steaming service that provides. In the Jan. 31 case, appears to the affected party.

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What does this cost? Butler makes a valid case in his article: "'s latest earnings report showed that the company makes about $10.8 billion per quarter, or about $118 million per day and $4.9 million per hour." For every hour it is not up and running, takes a hit of almost $5 million.

These calculations demonstrate that you should understand the true cost of cloud outages as you move more of your processes and data to public cloud services. I've found that businesses either overestimate or underestimate the cost of outages. You need to understand the true cost to create effective SLAs or to determine the correct amount of investment that should be made in cloud services.

For example, if you run a trading system, the cost of downtime is typically significant -- in many instances, $1 million an hour when the trading systems are not available. That cost should be factored into your legal agreements with a public cloud provider, as well as having management understand the likely costs you'll incur when outages do occur.

Keep in mind you'll have to deal with outages no matter if your servers are on a public cloud provider or in a local data center. I find it amusing there's so much angst around cloud outages when internal system outages are so commonplace.

In any event, you should approach the use of cloud-based platforms -- or any new platforms -- with a clear understanding as to how much outages will cost the business. Use this figure to determine the cost of risk, as well as the proper amount to spend on failover services, whether in the cloud or on premises.

It always comes down to dollars and cents.

This article, "Calculating the true cost of cloud outages," originally appeared at Read more of David Linthicum's Cloud Computing blog and track the latest developments in cloud computing at For the latest business technology news, follow on Twitter.

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