Risk Controller on Black Control Console with Blue Backlight. Improvement, regulation, control or management concept.


Pundits often tout the economic benefits of cloud computing as its most attractive feature. It is true that cloud lets you replace huge upfront capital purchases with a gradual operational expense model. But just this financial engineering cannot explain cloud's meteoric rise.

Surely you could architect this financial transaction by taking out a loan from your bank and leasing the equipment you need. There must be other massive benefits that account for the growing move to the cloud.


Cloud computing delivers many non-obvious benefits. One class of benefits is Risk Management.


Put simply, cloud computing lets you transfer risk to your vendor. And like any true free market transaction, you both end up better off. But what are these risks that you can transfer?


Capacity Utilization Risk - Estimating required capacity is hard even in a static world. You're compelled to start with the assumption that the past is a good guide to the future - and this isn't a great assumption. Add to that dynamic market conditions, and you can bet that your capacity estimate is too small, or too large. This is a huge risk to your business leading to waste at one end, and lost opportunity at the other. Cloud providers can spread this planning risk over their pool of customers. Somewhat counterintuitively, every new cloud customer further reduces the cloud vendor's capacity risk. This happens because the resource pool is shared across a greater number of users thereby flattening the peaks.


Development Risk - Setting up an on-premise HPC system is no trivial undertaking.

But the tasks to setup simulation hardware and software offer zero competitive advantage to you.

For example, if you employ your internal IT developers to setup a server, install the OS, install drivers, setup ANSYS etc - these are activities that offer ZERO differentiating value to your company. The irony is that although this is a low-value activity, it is also complex. At every stage of this process something can go wrong, and you have to plan for this. But these tasks have already been completed by the cloud vendor, and you just need to plug in to start using them. There is tremendous opportunity cost to tying up your valuable resources with these complex, low-value tasks. The cloud vendor can eliminate these wasteful activities.


Adoption Risk - This is another risk that very few companies think about, but which none can afford to ignore. What if you setup your on-premise HPC simulation cluster with all the best hardware and software, and very few of your engineers end up using it? This might happen for all kinds of reasons. Maybe the engineers were not trained fast enough. Or they hated the workflow. Or found it too complicated to use. Now you're stuck with a huge amount of capital outlay that is depreciating fast. A cloud vendor can help you test the waters with a small user pool, before you expand.


Risk of Operational Failure - When you setup a shared simulation environment, you need to architect it for stability and reliability. But when you use a Cloud HPC provider, you can outsource all of that to the vendor. At last count, Microsoft Azure has 50 (count them - 50) regions. Ask yourself, can my IT team do better than that? Should they try? By adopting a global Cloud HPC solution, your risk of operational failure drops dramatically. You begin relying on the cloud provider to do the due diligence, to apply the security patches, to architect stability.


Counterparty risk - The bogey man of cloud until recently has been security. Most enterprises have moved beyond the knee-jerk assumptions about cloud security. The question you should ask yourself is this, "does my cloud provider have the same incentives as me to protect my data"? This clarifies a lot. What is the likelihood that the cloud vendor can be lax in securing my data, and make a profit? Keeping your data safe is not just important to the cloud vendor, its essential to their survival. The incentives are perfectly aligned for the cloud vendor to treat your data as carefully as you would.


Regulatory risk - Countries and governments have unique rules, and these rules manifest themselves in various ways. One example is geo-location requirements of data. Fortunately, a large cloud provider such as Microsoft has whole divisions to ensure the rules are followed. Rather than trying to manage this risk yourself, the smart move is to outsource this risk to your provider and let them handle it for you.


To learn more about how cloud computing may be the best way to transfer risk to your vendor, give us a call.

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Thomas Francis

Posted by: Thomas Francis

Thomas has broad industry experience in enterprise software, cloud and IT operations. His most recent role was as Director of Software and Cloud Strategy at Dell. While at Dell he launched multiple cloud businesses including Dell Cloud Business Applications and Dell Cloud Marketplace. Previously, Thomas has held leadership roles in various technology companies including SanDisk and Landmark Graphics, a maker of 3D seismic interpretation software. Thomas has a Masters Degree in Aerospace Engineering from UT Arlington and an MBA from UC Berkeley and is based in Silicon Valley.
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