Tag Archives: credit ratings agencies

Coming soon, credit ratings-like agencies for Cloud service providers

By David Bicknell

You won’t get many positive thoughts towards credit ratings agencies, particularly from European governments, several of whom have suffered the ignominy of seeing their coveted Triple A status downgraded.

Now imagine that same credit ratings approach for Cloud service providers. The research group Gartner has, and put forward its thoughts in an article reported in The Australian. (registration required)

Gartner’s research vice-president Brian Prentice says the need for credible external rating agencies for cloud service providers will become more urgent this year, because current industry performance contracts are unable to quantify, or be accountable for, the costly and potentially devastating indirect effects that Cloud-based service failures have on businesses.

Gartner believes trying to mitigate risk using service level agreements will prove unwieldy for companies, because they are often dealing directly with consultancies that on-sell cloud services in complex multi-tiered agreements.

“The issue here is that it’s very hard to expect the vendors to have a set of impacts on their business commensurate with the problems that could come up. What that means is that you can’t come back on that, and you have to do the assessment on whether the problem is going to show up in the first place,” says Prentice. He envisages that ratings agencies, operating on similar lines to those in the finance sector, will emerge for cloud service companies by the end of the year.

This is an intriguing idea. I wonder where these ratings agencies will emerge from, and how they will compete. Will we see a Big Three emerge, like Standard & Poor’s, Moody’s, and Fitch? How will they compete with each other? How quickly will they be able to gain a reputation that companies can rely on? And on what will that reputation be based? Is this something that the management consultancy one-stop-shops will offer? Or will pure-play Cloud ratings agencies emerge?   

One article recently suggested credit ratings agencies rule the world. Could something similar soon be ruling the Cloud too?

How credit ratings agencies rule the world