The Cost of Downtime

Downtime can be very expensive. As more businesses rely on technology, it’s crucial to minimize downtime and cut down on any potential losses. Knowing the cost of your company’s downtime is definitely part of profit maximization strategy. A 2010 survey conducted by Coleman Parkes revealed that the cost of downtime for North American businesses is roughly $159,000 per year for each company. This has serious impacts on finance, procurement, operations, as well as mission critical services. North American Small and medium businesses lose about $15 billion per year from downtime. This is a substantial amount considering the fact that downtime can actually be avoided.

Moderate interruptions to IT services may be unavoidable for reasons such as hardware obsolescence, upgrades and software incompatibility. That being said, businesses should not have to endure long downtimes than the usual minor interruptions to their systems. Businesses generally endure ten hours of downtime each year and another 7.5 hours of downtime while trying to recover lost data. The same study conducted by Coleman Parkes mentions that IT system downtown costs North American businesses a whopping $26.5 billion of lost revenue in a year. The main reason being that many businesses fail to recover quickly from a service outage. Due to IT system downtime, it limited the ability of businesses to generate revenue by 29 percent. Downtime also affects the sales of the companies, resulting a drop of 28 percent, 19 percent and 39 percent for large, medium and small businesses respectively.

In attempts to further break down the costs, a Ponemon Institute study (“Calculating The Cost of Data Center Outages”) has shown that average cost of data center downtime was around $5600 per minute, with the average reported incident length at ninety minutes, resulting in an average cost per incident of $505,500. For business which rely on data centers to deliver IT services to customers, their downtime costs are particularly costly with the highest cost standing at $1 million. This is just for one single event.

During downtimes, businesses not only incur financial losses. Reputation is also at stake, especially if the company is well known and renowned worldwide. It can spur misinformation and doubts about the company’s reliability and efficiency if the downtimes occur frequently. Customers and clients might lose their confidence and loyalty towards the company, causing detrimental effects for the businesses in question. The stocks of a company can go downhill when the news of the downtime spreads, and competitors can take advantage. Staff productivity can also be affected as they would be unable to work during periods of downtime. Organizations today rely so much on IT that an unavailable system would render a significant portion of the business useless and idle as manual processes no longer exist. Employees would be diverted from other tasks to get the IT systems running. This can be very disruptive to the normal workflow.

There are also tangible elements that reflects the impact of the downtime such as the money spent on marketing and media to boost the company’s profile and image after the damage from the downtime. The impacts of the cost of the downtime can have many serious implications for businesses – regardless of size. Ways should be devised to minimize the occurances of downtimes whenever possible. $5600 per minute is simply too much money to waste.