Economics of Amazon Outage

As if the world needs another rant about Amazon EC2 outage, I’m going to risk adding my 2 cents to the debate.

On the one hand you have apocalyptic visions on the cloud future focusing on inherent unreliability of public clouds. On the other hand you have people explaining, reasonably enough, that there is nothing new about hardware failures, and talking about necessity of preparation for it by means of redundancy and other fail-safe methods.

I, obviously, see logic in the latter view, and understand that “outage happens:)”, and you need to prepare for it. However, often the missing ingredient in this line of reasoning is the cost of the preparation. In the end, everything boils down to economics. There is a very good description of estimating the cost of the preparation in this article: “The most straightforward approach is to estimate the cost of a failure and then multiply by the probability it will occur.”

Now, if the probability of having such failure is higher in the cloud than in private data-center, and cost of insuring against such failure is also higher, then overall costs, compared to private data center, rise significantly. Many cloud deployments do not include the cost of redundant infrastructure in their economic models. Adding that cost, which often doubles the numbers, can make it more difficult to justify the cloud strategy.

In addition to the cost of insurance against widespread outages, there is the cost of bullet-proofing your software against local “mishaps”. People working with the clouds surely experienced disappearing instances, diminishing processing resources resulting from heavy processing loads of other tenants, etc. Dealing with all this takes time and effort, i.e. money, to address. That money also goes into financial models used to estimate cloud worthiness.

Of course, elasticity of the cloud and its on-demand availability, have virtually no replacement, and will therefore be always needed by small or growing businesses. But for stable and predictable IT needs, it remains to be seen how the economics play out and what makes more sense from the financial perspective.