How to measure the financial cost of infrastructure outages?
There is a recurrent key question that is made by many customers, and potential customers. The question is what’s the real downtime cost for organizations?. That is, what is the average industry cost/time for periods of inactivity.
Unfortunately this question has an answer that most professionals do not want to hear: it depends!
Depends on the organization, industry, duration of downtime, number of people impacted, among several other elements of the operation. In addition to the monetary measurable factors there are also subjective factors which cannot be transformed into numbers like the reputation of the brand, customer retention and employees satisfaction. Everything that can suffer impact by disruptions that mean loss of revenue in sales, service sector overload and complaints of users that generate loss of confidence about the brand and congestion of phone lines that cause severe impact on the organization’s operation.
An example of financial loss from Amazon was a downtime of 49 minutes in 2013 which meant a loss of USD 5 million in sales. Not to mention the intangible damage. This downtime meant a loss of USD 102,000.00/minute for Amazon. The outcome of forgone sales tainted the confidence of its users/customers and or purchases that have been directed to Amazon’s competitors.
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Another example of high-impact downtime was an unavailability of 5 minutes of Google which meant a fall of 40% of global internet traffic.
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Among the impacts that should be considered as downtime cost are:
- Loss of revenue;
- Impact on the cash flow;
- Loss of productivity;
- Compliance and/or reports penalties;
- Breaches of contracts with customers and/or suppliers;
- Impact to customers and strategic partners;
- Employees’ morale and confidence in IT;
- Damage to reputation and brand value in the long term.
Anyway, it is estimated that downtimes are responsible for the loss of 50% average productivity when we refer to critical elements of business and operation. According to Gartner, the cost of downtime, taking into account an average between medium-sized and large companies, is of USD 42,000.00/hour. This number ranges from organizations that do not suffer as much impact from online retailers of which a non-availability can mean loss of millions, as in the example of Amazon.
According to Forrest Research, one of the biggest concerns are in downtimes caused by viruses that attack the organizations’ main systems. Dealing with this problem in a company with 6,000 desktops, can cost up to 2,000 hours of work.
On average an organization has 87 hours of downtime per year. Based on the standard cost of USD 42,000.00 and multiplying by 87 we get to an average loss of USD 3,654,000.00 with outages.
Ensuring maximum availability of the physical and virtual infrastructure of organizations, from critical IT systems to systems that support the business, is quite a challenge for all managers and experts in IT management.
Through OpMon, infrastructure management software and IT availability, we have contributed with many companies to apply good IT governance practices and, thus, minimize downtimes and business impacts