Members of the Fortune 500 could suffer direct financial losses in excess of $20 billion due to a partial outage of third-party cloud services, according to new research by specialist Parametrix.
The “cloud region” relied upon by the largest number of Fortune 500 companies is Amazon Web Services (AWS) “us-east-1,” with more than one third solely reliant upon it. According to Parametrix, a 24-hour outage of this region’s mission-critical services would cause a projected direct revenue loss of $3.4 billion to those companies, and a 48-hour outage, $7.8 billion.
However, a 24-hour halt affecting multiple AWS regions could cause a loss of $9.5 billion, one of the most significant single-day risk accumulations for the Fortune 500, while a 48-hour outage would cost $20.2 billion. In contrast, the MS Azure region “westeurope” is used by 10% of the Fortune 500, and loss exposure is much smaller. A 24-hour outage of this region’s services would cause projected direct revenue losses of $200 million.
Cloud usage is high among the Fortune 500; more than 90% of the 2022 cohort rely on the cloud for at least some of their activities. In 10 of 18 industrial sectors, 100% of Fortune 500 companies are cloud-reliant. The impact of outages becomes disproportionately more severe for some sectors as downtime duration increases. For example, a 24-hour outage of AWS us- east-1 would hit the Healthcare Services and Retail sectors hardest, but if the outage was 48 hours, Manufacturing would be the hardest hit.
Parametrix uses proprietary cloud monitoring technology to determine not just when a particular cloud region is operating or interrupted, but also to track which services are being delivered, and at what speed.
“Our research shows that companies in the Fortune 500, like a great many organizations, are precariously vulnerable to cloud outage risk,” said Yonatan Hatzor, co-founder and CEO of Parametrix. “Small outages are an inconvenience, but longer periods of time without cloud access could be seriously costly, causing billions in direct revenue losses, but the ripple effect would make the loss even bigger. The Fortune 500 are the largest providers of goods and services in the world. If just one of them ceases to function due to a break in the digital supply chain, the knock-on effect is felt almost immediately by their clients – and by consumers – in the form of lost productivity and reduced output. That cost is immeasurable.”
He continued: “The extent of the risk we have identified and measured is significant, but fortunately for companies in the Fortune 500 and all major corporations, it is easily transferred to the insurance market under cloud downtime policies. Risk managers just need to speak with their broker.”