Evil Fish

Quick math shows that Amazon might need to pay $2M to its customers due to its SLA policy.

Amazon Service in North Virgina has been down for more than 20 hours, to some degree.

Assuming Amazon’s EC2 Revenues in 2011 would reach $750M, I’m guessing that current monthly rate is $50M

Let’s assume %40 of the total EC2 servers are in north Virginia region (I’m too lazy to do the exact calculations).

Amazon SLA states that it will pay %10 of the bill for the effected month (April:)) if SLA is less than 99.5%. 20 Hours of downtime mean SLA for this year would be smaller than 99.8.

If the Annual Uptime Percentage for a customer drops below 99.95% for the Service Year, that customer is eligible to receive a Service Credit equal to 10% of their bill (excluding one-time payments made for Reserved Instances) for the Eligible Credit Period. To file a claim, a customer does not have to have wait 365 days from the day they started using the service or 365 days from their last successful claim. A customer can file a claim any time their Annual Uptime Percentage over the trailing 365 days drops below 99.95%.

Therefore Amazon has to pay %10 of the monthly bill to the relevant customer.

$50 M * %40 %10 = $2M.  By the way, it seems this is not “real money” but only credit to use EC2, so real cost to Amazon is probably 70% of that (Their margins are probably much nicer than they claim  :)).

The other interesting questions is : What was the cost of the downtime for Amazon’s customers? Would I get free badges from Foursquare? That could cost them millions of free points….

Some disclaimers:

• Customers have to ask for their money back, not sure all will remember to do it
• The SLA states that more than one availability zone needs to be missing in order to count as “downtime”. On 1:48PM PDT  the status update mentions that only a single availability zone is unavailable, so maybe the relevant downtime is not 20 hours
• I’m not a lawyer ,and did not do a thorough analysis of the agreement in any way. Just trying to see economics meaningful of SLA’s
• I still think EC2 is very cool and they seem to be very honest about what’s going on.God knows most internal enterprise apps are not in a better status.  It would be interesting to see how the market leader behaves in this case and how much will they actually pay their customers back.
• 40% might be a bit high , but it does seem most servers are still in the US

Tags: Amazon Elastic Compute Cloud, Downtime, Service level agreement, SLA

This entry was posted on April 22, 2011 at 7:18 am and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.