analysis

Oct 31, 20256 mins

Business ContinuityDigital TransformationHybrid Cloud

It’s become cliché to say that the cloud is the backbone of digital transformation, but cloud outages like the recent AWS incident make enterprise dependence on the cloud painfully clear. Last week’s AWS outage impacted thousands of businesses worldwide, from SaaS providers to e-commerce companies. Revenue streams paused or evaporated, customer experiences soured, and brand reputations were at stake.

For enterprises that suffer direct financial losses from any outage, the frustration runs deep. As someone who has advised organizations on cloud architecture for decades, I often hear the same question after these events: What can we do to recover our losses and prevent devastating disruptions in the future?

The first step for any enterprise is to gather the facts about the outage and its impact. Cloud providers like AWS are quick to produce incident reports and public updates that usually detail what went wrong, how long it took to resolve, and which services were affected. It’s easy to get distracted by blame, but understanding the technical and contractual realities gives you your best shot at effective recourse. For enterprises, the key information to collect is:

• What services or workloads were impacted and for how long?
• What were the direct business consequences? Missed transactions, customer attrition, or downstream costs?
• What does your service-level agreement (SLA) actually guarantee, and did the outage breach those guarantees?

It’s not enough to know that “the cloud was down.” The specifics—duration, affected zones, the criticality of business functionality—will determine your next steps.

Cloud SLAs and compensation

Here’s one of the harsh realities I’ve encountered: Most enterprises overestimate what their public cloud agreements guarantee. AWS, Azure, and Google Cloud (along with other hyperscalers) offer clear-cut SLAs, but the compensation for outages is almost always limited and rarely covers your actual business losses.

Typically, SLAs offer service credits based on a percentage of your affected monthly usage. For example, if your web application is unavailable for two hours and the SLA states “99.99% uptime,” you might receive a percentage credit for future usage. These credits are better than nothing, but for enterprises facing six-figure losses from a major outage, they are a mere drop in the bucket.

It’s important to recognize that compensation usually requires you to file a claim, often within a limited timeframe, and depends on your ability to demonstrate direct impact. Providers will not cover consequential or indirect damage such as lost sales, contractual penalties from your own clients, or damage to your brand. These are your problems, not theirs. Although this is difficult to accept, understanding it up front is better than being caught off guard.

Limits of legal recourse

Could you go further and pursue legal action? The answer is rarely satisfying. The standard cloud contract, designed by swarms of well-paid lawyers, strongly limits the provider’s liability. Most terms of service explicitly exclude responsibility for consequential and indirect losses and cap direct damages at the amount you paid in the previous month. Unless the provider acted in bad faith or with gross negligence—which is very hard to prove—courts tend to uphold these contracts.

Occasionally, if your outage has broader impacts, such as a widely used financial platform that prompts regulatory scrutiny, high-profile cases may occur. But for most companies, the only realistic recourse is through the SLA credit process. Pursuing a lawsuit not only incurs substantial legal costs, but it is rarely worth your time compared to the minor damages you might recover.

Assess your business continuity strategy

The next step is to evaluate your organization’s risk profile and cloud architecture. In the tech world, the saying “Don’t put all your eggs in one basket” matters as much for computing as for investments. While cloud engineering teams often believe in the robust, distributed nature of the public cloud, outages expose uncomfortable truths: Single-region deployments, insufficient failover mechanisms, and a lack of multicloud or hybrid strategies often leave businesses vulnerable.

It is critical to conduct an honest post-mortem. Which systems failed and why? Did you rely solely on a single cloud provider or region without proper replication or fallback? Did your own resilience measures, such as automated failover, work in practice as well as in planning?

Many organizations realize too late that their cloud backup was misconfigured, that critical systems lacked redundant design, or that their disaster recovery playbooks were outdated or untested. These gaps turn a provider’s outage into a companywide crisis.

Three steps to true resilience

In the aftermath of a public cloud outage, enterprises must eventually move beyond seeking compensation and develop meaningful protection strategies. Drawing on lessons from this and previous incidents, here are three essential steps every organization should take.

First, review your architecture and deploy real redundancy. Leverage multiple availability zones within your primary cloud provider and seriously consider multiregion and even multicloud resilience for your most critical workloads. If your business cannot tolerate extended downtime, these investments are no longer optional.

Second, review and update your incident response and disaster recovery plans. Theoretical processes aren’t enough. Regularly test and simulate outages at the technical and business process levels. Ensure that playbooks are accurate, roles and responsibilities are clear, and every team knows how to execute under stress. Fast, coordinated responses can make the difference between a brief disruption and a full-scale catastrophe.

Third, understand your cloud contracts and SLAs and negotiate better terms if possible. Speak with your providers about custom agreements if your scale can justify them. Document outages carefully and file claims promptly. More importantly, factor the actual risks—not just the “guaranteed” uptime—into your business and customer SLAs.

Cloud outages are no longer rare. As enterprises deepen their reliance on the cloud, the risks rise. The most resilient businesses will treat each outage as a crucial learning opportunity to strengthen both technical defenses and contractual agreements before the next problem occurs. As always, the best offense is a strong defense.