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How Insurance Can Limit the Impact of Cloud Outages & Downtime


Key Takeaways

If you’re like most businesses, some portion of your operation relies on the cloud. After all, it’s an affordable and effective way to store and share data. Plus, this approach lets you scale quicker, reduces overheads costs, improves collaboration, and more. But even the best strategy has its weaknesses, including cloud-based solutions. So, when your cloud computing platform experiences an outage, what’s your game plan? 

AWS Outage Insight

Amazon Web Services (AWS) experienced a devastating outage in December 2021. According to Forbes, a software problem caused the outage that impacted business operations negatively. More specifically, the cause was a bad piece of code that caused a massive snowball effect. 

The outcome was jaw-dropping. E-commerce sellers were unable to process thousands of orders, not to mention grocers also missed hundreds of deliveries. Educational institutions couldn’t administer tests to students. Individuals nationwide dependent on app-controlled technology — vacuums, pet feeders, etc. — had to perform tasks manually. 

Of course, the 2021 AWS outage was only one incident. Other outages have caused similar issues, albeit not to the extent of the AWS outage. Still, for businesses that rely on third-party IT services, these outages cause significant concern. 

The Impact of Third-Party IT Outages

Companies in all sorts of industries depend on the cloud for daily operations. Think about popular household names, such as Netflix, Pinterest, Instagram, and Dropbox. Each one of these businesses has found tremendous success relying on the cloud. And most of us have grown accustomed to having their services at our fingertips. 

Various processes can come to a screeching halt when an outage occurs, from payroll and invoicing to collaboration and data sharing. That said, an outage can seem catastrophic to businesses, no matter their size or popularity. Here are a few real-life examples of how an outage impacts companies.

Issue: Missed Revenue

Businesses that rely on cloud-based processes can take a hard hit during an outage. Online stores can’t always push through transactions or generate delivery orders. Without smooth ongoing transactions, these companies miss out on revenue they would have otherwise earned. And we all know that making up for the lost time is nothing more than wishful thinking. 

Example: The AWS Outage

During the AWS outage, e-commerce sellers couldn’t ship 10,000 to 12,000 items. Amazon drivers busted time by playing karaoke when they waited out the downtime. Whole Foods had to cancel multiple orders and even offered refunds in sympathy. So, in addition to missed revenue, many individuals had to swallow the jagged pill of lost pay.

Issue: Data Protection Failure

Many third-party IT services focus on reducing latency, handling traffic spikes, and protecting companies from various cybersecurity attacks. When internet outages occur, businesses relying on the cloud are more exposed than usual. 

Example: The Fastly Outage

Fastly, one of the world’s leading Content Delivery Networks (CDN), experienced an outage for roughly an hour early in June 2021. As a CDN, Fastly runs an edge cloud network that tackles many of the functions listed above, specifically protecting businesses from DDoS attacks. 

While we’re still unsure of the number of cyberattacks that took place, several major sites were hobbled by the outage, including: 

  • The New York Times
  • Twitch
  • Financial Times
  • Reddit
  • Vox Media
  • Fast Company

Issue: Lost Clients

On the one hand, clients might flock to your business when your cloud-based processes are on target and tout your reliability. On the flip side, clients often panic during an outage, and the result is often lost clients. 

Example: The Akamai Outage

The summer of 2021 was red hot in terms of outages. Akamai, one of the largest computing platforms globally, ended up having to roll back a software update to remedy its hour-long outage. PlayStation Network, Airbnb, FedEx, and UPS suffered from the downtime. Although Akamai resolved the problem within the hour, the damage had already been done.

Our Solution — Downtime Insurance

It’s not breaking news that tech companies have needed to protect themselves against business interruption (caused by downtime) for quite some time. Unfortunately, this issue has largely been unaddressed by insurance carriers until now. 

Here at Founder Shield, we offer a solution specifically designed for situations like the AWS and Fastly outages. Businesses can now protect their cash flow from unexpected interruptions. For example, Downtime Insurance responds to pay for these covered losses if downtime occurs.

Here are a handful of other ways Downtime Insurance can benefit your company:

  • Protect your revenue stream
  • Have the cash to recover fast
  • Cover SLA liabilities

Understanding the details of what coverage your company needs can be a confusing process. Founder Shield specializes in knowing the risks your industry faces to make sure you have adequate protection. Feel free to reach out to us, and we’ll walk you through the process of finding the right policy for you. 

Downtime Insurance Inquiry

What to know more about downtime insurance? Talk to us! Please contact us at info@foundershield.com or create an account here to get started on a quote.

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