What Unanticipated Downtime Means for Your Business
Calculating the real cost
When big businesses face unanticipated downtime, it’s news. We’ve all seen the headlines: “Airline Cancels Thousands of Flights Due to Network Outages,” or “Major Retailer’s Website Goes Dark on Black Friday, Busiest Shopping Day of the Year.”
Many business owners or IT managers overlook what unanticipated downtime could mean for their business. In fact, many are well-prepared for planned downtime events (such as migrations, scheduled maintenance, etc.). However, when the unexpected happens, they are stuck between a rock and a hard place.
Consider all of the factors that may contribute to unplanned downtime: cyberattacks, natural disasters or other severe weather, vendor issues, network outages, component failures, and human error.
While that is a lot of ground to cover, consider the alternative. Not preparing for these events can lead to an unanticipated downtown and all of the negative consequences that come with it.
Let’s look at exactly how unanticipated downtime impacts a business.
Adweek reports that half (50%) of enterprise employees report losing access to critical data during outages — a number that rises the smaller a business is.
While this may seem like a temporary problem where data can be brought back online after an outage, this isn’t always true. Many organizations are able to get data back online in a few minutes; however, the value of that data may be determined by when the last backup was run. If the last backup was 12 hours ago and data regarding customer orders that occurred between then and the outage can’t be restored, that’s a problem.
Data breaches and downtime are often a real chicken-and-egg scenario. In many instances, data breaches lead to downtime. That said, there is a real risk that downtime can cause data breaches, too. What can happen during downtime is that employees leverage unsecured third-party services (think DropBox) to avoid disruption to their work. Tapping into these systems can put sensitive company data at risk for a breach.
When data breaches do lead to downtime, the result is lost business, which costs enterprises in the U.S. a great deal. More than 50% — or $4.5 million — of the total cost of a data breach in the U.S. is tied to lost business. That number is double what companies in other countries experience.
Unfortunately, the number of these data breaches is on the rise, with the percentage of companies that experienced a malicious external data breach increasing 9% over the past six years. Almost half (49%) of those data breaches are due to system problems and human error, costing victims between $3.24 and $3.5 million on average.
A Carnegie Melon University study notes that cognitive function can decrease by 20% after an interruption.
Another study on the financial industry noted how disruptive interruptions are to productivity: On average, interruptions take up 238 minutes per day. Restarting after an interruption equals an additional 84 minutes each day. Another 50 minutes gets sucked into time lost to stress and fatigue. In fact, Adweek surmises that downtime can lead to a 34% loss in productivity among enterprise employees.
To fully understand the quantifiable impact of lost productivity resulting from a data breach, simply look at how people within the company are impacted:
- Will there be 1,000 operational people responsible for continued work even though they no longer have access to business applications?
- What is the average hourly salary of each of these impacted employees?
- On a scale from 1 to 100, what is the productivity impact factor?
- Finally, how does that translate into the total cost impact?
Cost of downtime = (impacted employees) x (productivity factor %) x (average hourly salary)
Providing an equation for quantifying the cost here can make it that much more meaningful.
It’s no surprise that data loss, data breaches, and lost productivity add up to lost revenue. According to an ITIC study, an overwhelming majority (98%) of organizations report that a single hour of downtime costs them $100,000 or more, and 81% state that the hourly cost is $300,000 or more.
It doesn’t stop there. With the costs of SLA downtime rising about a 25% to 30% over the years, three in 10 enterprises report that one hour of SLA downtime actually costs them $1 million.
As averages, it’s possible that actual revenue lost can be much greater, depending on the size of the business. Often, revenue losses can reach millions of dollars per incident.
The best route to understanding (and quantifying) how much revenue may be lost due to downtime is to calculate it. Not only does this provide a highly accurate idea of just how much is at stake, but it provides motivation for prevention.
Consider calculating either the labor cost per hour of downtime or revenue lost per hour of downtime — or both. These will require you to have information about revenue, the number of hours key employees work, the number of employees impacted, employee benefits, and total revenue broken down by day.
While it may seem like going to great lengths in order to quantify the potential revenue lost, it’s important to understand exactly how the business will be affected.
Costs That Cannot Be Quantified
In addition to the costs outlined above, which are very quantifiable, there are other costs that must be considered. Even though it can be hard to define these monetarily or in other numerical terms, they are just as significant. These can disrupt operational framework, brand reputation, company culture, and perception in the market. Some of these include:
- Stalled or abandoned IT initiatives. When system downtime happens, addressing it becomes a top priority. This may last for weeks or months, depending on the precise size of the fallout. Unfortunately, other IT and development projects fall to the wayside as a load on the technical team to fix the downtime problem increases. It’s an interruption to the progress of other important and innovative initiatives.
- Bruised employee morale. Downtime can hurt company culture by damaging employee morale. Not only are the impacted teams going to feel the blow of such a critical error, but other teams may begin to doubt the competence of the overall company as well as the teams involved. This can negatively impact teams’ ability to work together and focus on goals.
- Loss of market opportunities. Reputation damage can be hard to measure, though it can have very quantifiable impacts in terms of lost business. System downtime can irreparably damage a company’s reputation. In some cases, a company may suffer irreversible loss of market opportunities due to a technical gaffe like downtime.
Given the steep potential costs and fallout of unanticipated downtime, businesses are well-advised to create a plan and seek out help from a trusted partner where possible. Preparedness is the only surefire way to reduce the costs and consequences associated with downtime.