Buntel Blog

Cloud Insurance?

We’ve seen a number of high profile outages recently in some IaaS and PaaS offerings.   All vendors (I hope) have various service level agreements (SLA’s) that try to explain the guarantee that they make about the availability of the platform.  But what happens when they fail?  Most offer relief to the customer in the form of a service credit (and, maddeningly, require the customer to proactively make a claim for credit!).  The cloud vendor in essence says, “you built your business on our platform, and we failed to deliver the availability that we offered.  But don’t worry, we’ll make it up by giving you back a credit equal to 10% of your bill.”  Well, that’s nice.  Isn’t that just like a restaurant saying, “You got a nasty case of salmonella from your dinner, but we’ll make it up to you with this coupon good for 10% of your next dinner here.”  Hmmmm, thanks, but I’ll pass! 

So what can be done instead?  Certainly a PaaS vendor can’t be held responsible for the business impact to all of their customers caused by an outage.  For some customers it may have little or no impact, while to others it may be devastating!  Bad things happen, and some get hurt more than others: that’s how it goes with natural disasters and other accidents, right?  Sure, but there’s something that you can do to ameliorate the impact of those bad things – you can buy insurance!         

Insurance is simple:  I trade my risk of loss to you in exchange for a payment.  If the risk never materialises (e.g. the tornado never strikes), you keep the full payment.  If it does, you compensate me (financially, anyway).  So why can’t we do this for the cloud?  I can purchase various levels of coverage based on the potential damage that would be done to my business in the event of a PaaS or IaaS vendor’s failure to meet their SLA.  Like in automobile insurance, the premiums would vary depending on the amount of coverage (the value of the vehicle), the likelihood of a problem (a sports car vs. a Volvo), and the reputation of the vendor (I’ll omit an analogy here to avoid a flame war ;) 

Some of the benefits:

Clearly there’s a benefit for the business who wants to move to the cloud, but is nervous about the change.  Similarly to how the US FDIC (deposit insurance corporation) helped get Americans to keep their money in a bank instead of under their mattress, there’s comfort in knowing that someone’s going to cover you if anything goes wrong.  Cloud insurance could greatly increase the rate of cloud adoption.

There’s also a benefit for the IaaS and PaaS vendors.  A third-party insurance market could help push vendors towards better and better levels of service as they try to gain customers who will shop for the lowest insurance rates.  It’s like the “five-star safety ratings” that automobile manufactures covet!  A safer, more reliable product will be cheaper to insure, thus more desirable to customers.  It would be much more effective in changing behaviour by the vendors than simply making them give out a 10% credit (not even a 10% refund!)

Finally, it could be a great business for an ambitious insurance organisation!  Insurers are always looking for the next policy to write.  Where there’s fear, there’s an insurance policy to write: and we all know that the Cloud certainly causes fear and trembling in many corporate IT managers today!

So, who's up for it?  Or maybe it's already out there?  Thoughts?