Cloudonomics: The Business Value of Cloud Computing, + Website

Exogenous Uncertainty

Taleb, who catapulted the phrase “black swan” into the contemporary lexicon of risk managers, has related a story about the four biggest losses at a casino based on risk consulting work that he conducted.22 They weren’t defined by the statistics of win-loss percentages for craps or blackjack, or even predictable causes, such as card counters or brazen daylight robberies.

Instead, they were costs and lost revenue due to: the premature end of the Siegfried and Roy show from a tiger’s alleged attack23; a contractor upset over a proposed workplace injury settlement who then tried to dynamite the hotel; the inexplicable failure of an accounting clerk to file reports with the Internal Revenue Service, which led to a huge fine; and a ransom payment for a kidnapped casino owner’s daughter.

In the world of IT, uncertainty can come not just from sudden customer demand spikes but data center outages due to floods, fires, hurricanes, and tornados; distributed denial of service attacks; disgruntled former or current employees with root passwords, network outages due to backhoe attenuation, and other causes. In other words, both the level of demand and the level of capacity can experience unexpected discontinuities.