In the last 12 months or so there has been a number of natural events that have had unpredicted consequences to business. There was the Volcano that grounded Europe and created significant disruption to some global supply chains.  There was (and still is) unrest in northern Africa that made many business question the safety of their assumptions when selecting locations for low cost country outsourced operations and there was the tragic earthquake and tsunami in Japan with it enormous human cost and the lingering consequences to any business reliant on Japanese industry.

Procurement and sourcing organizations play a vital role in helping to mitigate and manage the risks inherent in operating in a fragile global economy. Risk management is regrettably under valued sometimes but these events should have brought into crisp focus the necessity of ensuring that backup strategies are in places – not just for the routing, mundane and predictable events but also for the unthinkable. And this is why it’s so shocking to have seen the massive disruption cause by Amazon cloud crash this week.Purchasing Insight

Cloud Crash

The problems began early yesterday morning (21st April 2011) and had not been completely repaired by the end of the day. Business effected included Quora.com, Reddit.com, GroupMe.com and Scvngr.com but it wasn’t just the internet only businesses. The NY Times reported bigger players including Pfizer and Nasdaq were also effected.

There was some interesting comments from companies effected reported by the NYT.

Campbell McKellar, founder of Loosecubes: “Clearly you’re not in control of your data, your information. I’m getting business interruption insurance tomorrow, believe me, and maybe we get a different cloud provider as a backup.” Genius – just a little too late.

And Jeff Janer, chief executive of Springpad “We’re just all keeping our fingers crossed that they get back as quickly as possible. Amazon as a resource for a company like ours makes an awful lot of sense.” It a shame Springpad’s risk mitigation strategy didn’t make an awful lot of sense. Personally, I’d hesitate to suggest “crossing your fingers” as a risk management tactic.

Technology is notoriously fragile. If our cars were as unreliable as our PC’s we’d walk everywhere – so why were these organizations floundering when their cloud provider had a few issues? Did they not know that computers sometimes break?

Risk management is a fundamental business discipline and procurement professionals should lead from the front in high-lighting the critical importance of ensuring that contingency plans are in place. Whether setting up a shared service operation overseas, relying on a third party to manage invoices or adopting a cloud based IT strategy – alternatives need to be in place to cater for the very predicable unpredictability of the real world.