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September 29, 2008
Cloud Computing and the Financial Crisis
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A somewhat neglected aspect of the current financial crisis is the huge spike in trading volumes in recent days. In some cases, they have raised to more than double the average of the months (and years) that preceded the crisis. Systems, of course, don't care if stocks are going up or down; they just need to handle the transactions. And for the most part, the IT systems of Wall Street, both at the banks and the exchanges, handled these unexpected "black swan" peaks.
How did they do it? In the same way that almost every organization out there is preparing for expected and unexpected loads: by over-provisioning systems. In a CNET piece about the 2006 tax-day snafu by TurboTax, an Intuit spokesperson was quoted as saying: "Every year, we take the busiest minute of the busiest hour of the busiest day and build capacity on that. We built our systems to (handle that load) and we went above and beyond that."
Intuit's solution to the problem of peaks in demand is typical, but far from ideal. First off, it's extremely expensive. According to analysts, average datacenter utilization rates are at the 15-20 percent range. That means that on average, 80-85 percent of the organization's IT resources -- servers, storage, networks and software -- are idle. This creates a huge financial drain on the company. Second, as the Intuit story exemplifies, it is no solution at all.
Predicting demand is an extremely tricky business. The busiest minute last year is not necessarily a solid indicator of the volume during the busiest minute this year. It is no surprise, then, that major application failures are frequent, from the famous eBay outage in 1998 to the Twitter outages of 2008. And these issues don't affect just Web companies. The Dow Jones Index failure last year, the AT&T iPhone provisioning fiascoes and many other stories come to mind -- all as a result of the inability to scale on demand to handle unexpected peaks.
With the increasing possibility of weakening global economies -- and shrinking IT budgets to follow -- companies can no longer engage in the expensive practice of over-provisioning. On the other hand, with increased competition and the increased mission-criticality of IT systems to businesses and consumers, failure is not an option. But failure is not relegated to complete down-time. A system's inability to scale might just result in a slow-down, but this, too, can be extremely damaging to the business.
Consider a recent Tabb Group report estimating that a mere 1 millisecond delay in response to a trading request can cost a brokerage firm up to $4 million. Or a Google study that an additional 500 millisecond delay in returning a "search results" page decreases user traffic by 20 percent.
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