UK: Amazon And The $150 Million Typo: Cloud Risks For Early Stage Companies, And How To Mitigate Them

Last Updated: 31 March 2017
Article by Stephen McGinley and Chris Hill

Although the impact was not quite as big as some headlines had suggested ("Amazon Just Broke the Internet"), the outage of Amazon's Simple Storage Solution (S3) in the US-East-1 region on Tuesday 28 February caused significant disruption. The Wall Street Journal quoted Cyence Inc., a start-up specialising in cyber-risks, as estimating that the Amazon outage cost companies in the S&P 500 index $150 million. Apica Inc., a website-monitoring company, said 54 of the internet's top 100 retailers saw website performance slow by 20% or more. Connected lightbulbs, thermostats and other IoT hardware were also impacted, with many unable to control their devices as a result of the outage. Nest warned customers that its internet-connected security cameras and smartphone apps were not functioning properly as a result of the Amazon issue. Amazon was unable to update its own Amazon Web Services (AWS) status dashboard for the first two hours of the outage because the dashboard itself depended on the unavailable systems.

Amazon's explanation was that "an authorized S3 team member using an established playbook executed a command which was intended to remove a small number of servers for one of the S3 subsystems that is used by the S3 billing process. Unfortunately, one of the inputs to the command was entered incorrectly and a larger set of servers was removed than intended." Removing a significant portion of the server capacity required full restarts and this problem was compounded by the fact that parts of the system had not been completely restarted for several years, a process which took longer than expected.

As a result of the outage, Amazon said it is making several changes to the way its systems are managed and promised to make changes to improve the recovery time of key subsystems.

In signing up to cloud hosting contracts, a lot of companies assume everything will be fine and their websites, applications and data will always be available when needed, particularly if they are choosing one of the leading providers of hosted services such as AWS. In August 2016 Gartner identified AWS and Microsoft as the only two companies in its "Leader" category for cloud infrastructure as a service (IaaS) worldwide (ranking AWS ahead of Microsoft) and said that "The market for cloud IaaS has consolidated significantly around two leading service providers.". This consolidation increases the impact of outages such as the one impacting Amazon's S3 service.

Given the potential impact of an outage on critical services, customers may need to reconsider how they mitigate the risk of downtime, and we discuss the possible options below.

Increasing the target for availability

Taking Amazon's S3 service as an example, when used in a single region it is said to be designed for 99.99% of availability with a service level agreement for availability of 99.9%. However, relying on a service in a single region offers the potential for a single point of failure. The Amazon outage on 28 February involved just one region, US-East-1 in northern Virginia USA, but the impact of the outage was so significant as this is the most heavily-used regions in the AWS global infrastructure.

The impact would not have been so significant if AWS customers had chosen a multi-region architecture as sites and applications using S3 in a different region would not have been affected. AWS currently operates 42 availability zones (AZs) within 16 geographic regions around the world. AZs consist of one or more discrete data centers, each with redundant power, networking and connectivity, housed in separate facilities, miles apart from each other on separate flood plains. By contrast, another of AWS's services, EC2, provides an SLA of 99.95% but this greater availability threshold is based on deployment to at least two AZs (although S3 can only be selected by region, not by AZ).

The disadvantage of this approach is that multi-region implementations will increase cost and complexity. Customers are understandably reluctant to achieve an extra '9' of availability by selecting another region and potentially doubling their hosting costs. However, the additional costs and complexity will need to be measured against the risks of operational disruption, financial loss and reputational damage arising from significant unavailability of critical data and/or applications in a worst case scenario.

Negotiating a stronger contractual position

Contracts with major hosting providers usually restrict the customer's remedy to service credits if the provider fails to meet its availability target. For Amazon's S3 service for example, if availability falls below the service level of 99.9% in a month customers would typically be awarded a service credit of 10% of the monthly fee. This may well be wholly insufficient recompense to customers who need to ensure that they can access their data or keep their sites and applications up and running at critical times, particularly if the service credits do not cover customers' liability to their own customers as a result of unavailability.

The major hosting providers have shown some willingness to offer more contractual protection for their customers by offering increased limits on their liability for damages caused by service level failures but this has come with a significant cost in terms of fees or only been available to customers spending very significant sums with the hosting provider. Such additional legal protection has typically not been afforded to customers spending less, and this is understandable: from the hosting providers' perspective, they are offering a low-cost and largely commoditised solution and it is simply not realistic to expect them to carry significant legal risks at the price point at which the lower end services are offered. In other words, you don't get what you don't pay for, and so at the cheaper end of the market where commoditised services are being provided, customers are very unlikely to be able to negotiate better legal protections.

However, where high levels of availability are essential to their business model customers should insist on having visibility over who is hosting their data and applications and ensure that during contract negotiations suppliers are required to identify all key subcontractors (and their subcontractors) so that the customer can identify potential vulnerabilities in the supply chain and consider steps to mitigate the risk of downtime before becoming committed to the contract.

Taking more control over hosting arrangements

Moving away from a massive scale, multi-tenant model towards a single-tenant, private cloud or even on premise deployment provides an opportunity for more control but at a cost both financially and in terms of operational flexibility. The cost benefits of deploying to the cloud are a significant source of advantage for start-ups and smaller organisations which do not have a major investment in existing on premise hardware, combined with the agility and flexibility of cloud computing and instant access to global infrastructure. In contrast, large enterprises deploying to the cloud face a considerable incremental cost in addition to maintaining legacy on premise resources until these can be retired, a process which may take several years.

Even for start-ups though, the need to take control over how critical services are delivered may outweigh the costs. Digital challenger bank Monzo, which offers a contactless prepaid Mastercard and plans to offer a free current account this year, said that a severe outage resulting in its cards and app not working for most of Sunday 5 March was caused by a third party processor used by Monzo to connect to payment networks. When it first started it made sense for Monzo to use a third party processor because the process for connecting directly to the payment networks was long, costly and complex and at the time there seemed to be no benefit to its customers. However, Monzo has just finished a 12-month project to connect directly to Mastercard so that it can process transactions entirely using its own technology. Announcing this change in a blog post published on 6 March, Monzo's head of engineering Oliver Beatties said that "We see ourselves as a technology company as much as a bank, and going forward our strategy is to bring all critical systems in-house and continue to develop our own platform atop modern technology which we control.".

Local back-ups as a safety net

Despite the attractiveness of short-term savings in moving data and applications to a single region, cloud-based solution, this approach could end up being very costly if businesses are dependent on a single point of failure without having an alternative solution which they can access quickly. From a practical perspective, whatever model they adopt for hosted services customers need to ensure that they make regular back-up copies of their data stored by a hosting provider, downloading copies of the data to their own systems or to an alternative hosting provider so that if absolutely necessary they can quickly implement an alternative solution.

The same applies to software: keeping full back-up copies of key applications on-site means that, should a hosting provider have an extended outage, there is at least an option to redeploy elsewhere rather than risk an indefinite interruption in service.

Worth paying the extra hosting fees?

While cloud storage and processing does offer significant price and operational advantages for start-ups, it may well be worth even for early stage start-ups thinking about the relative costs of paying for hosting in an extra region and / or with alternative provider, relative to the impact on operational stability, reputation and customer retention that a prolonged full outage might have on a growing business. Even the most heavily negotiated hosting contracts are highly unlikely to afford adequate recompense for the effects of a full outage after it has happened. As such, while it is still strongly advisable to review the contracts (not least to ensure compliance with, for instance, data protection legislation), the strongest way to deal with the risks emanating from an outage is probably still to use an architecture for the hosting of data and software that will minimise the risk of there being a full outage in the first place.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.