How Expensive is Downtime?

How Expensive is Downtime?

Have you ever experienced an IT system failure? How about a computer not operating properly? These occurrences are called “Downtime”. A business will experience downtime when its infrastructure or network fails to perform its primary function. There are many reasons for downtime but the three main reasons include system failures, human errors, and network outages. It’s important to understand what causes downtime and how to help reduce the duration of the downtime incident. No matter the reason, IT downtime has not only cost businesses a lot of money but it can also even close businesses for good.

Reasons for Downtime

Knowing and understanding why downtime occurs, and how to help prevent issues that arise, while being prepared for downtime, will help reduce risks and costs. I’m sure we have all experienced downtime. For example, your computer wouldn’t start or it just shut down, a website won’t load, or a natural disaster prompted a power outage that cut off the network completely. System failures, human errors, and network outages are among the top reasons for downtime.

• System Failures: This includes computers, telephones, printers, servers, routers, power supplies, and more. When any one of these systems fails, the business fails. Network monitoring and system updates are crucial to keeping your system running smoothly. In-house technicians can run regular maintenance checks but partnering up with a managed IT services company, like Palindrome Consulting, will thoroughly take care of the hard work for you.
• Human Errors: Humans account for 22% of system downtime. At any time, a person can accidentally delete a system file, causing an application to crash. Someone can accidentally spill their coffee on a network server, also causing downtime. To reduce human errors, it’s best practice for an organization to provide employees with training on the use of systems and software, create and document operating procedures for staff to follow, and keep important infrastructure, like the network server, away from any potential “spills”.
• Network Outages: These situations are harder to control or prevent. We never really know how hard or when Mother Nature will hit us, causing a power outage. We also don’t know how a provider’s systems operate. It’s a good idea to reach out to service providers, such as internet, phone, and power, and ask about their average uptime, past outages, and length of their system’s downtime. It is also a good idea to consider using different providers for different services, instead of bundling all services with one provider.

Actual Cost of Downtime

According to a 2014 study by Gartner, the average cost of downtime is $5,600 per minute. That is an extraordinary amount of money for one minute. This was also the figure presented in 2014. In the past 7 years, that amount has increased to approximately $9,000 per minute. That is a lot of money for any business of any size. For smaller businesses, the margin of downtime cost is lower, as reported to be approximately $427 per minute, but either of these amounts can close a small business forever. Of course, there are a few factors that determine the exact cost of downtime, such as industry vertical, organization size, and the business model.

To calculate the downtime costs for your business you can take information from your recent downtime incident and plug it into this quick downtime formula:

Minutes of Downtime x Cost-per-minute = Downtime Cost

Let’s say, for example, there was a system downtime of one hour:

• The cost for a small business would look like this: 60 x $427 = $25,602 – It cost your company $25,620 in that one hour of downtime.
• The cost for a larger business would look like this: 60 x $9,000 = $540,000 – It cost your company a whopping $540,000 in just that one hour of downtime.

There is more to understanding the full cost of downtime, other than calculating with the formula above. The true cost of downtime also includes business disruption, revenue loss, end-user productivity, and lost internal productivity. In some cases, it’s important to consider costs incurred through penalties, fines, depleted inventory, contractor costs, equipment replacement, and employee retention.

Minimize Your Downtime Costs

It’s important to be prepared for downtime by mitigating downtime risks to minimize downtime costs. There are several ways to do this: have a great disaster recovery plan in place, communicate clearly and often, eliminate single points of failure from infrastructure and processes, prioritize prevention with outdated systems and security features, and discuss impacts and actions after an incident has taken place to prevent it from happening again.

For over 20 years, Palindrome Consulting has been the leading IT Consulting company for Ft. Lauderdale, Miami, and across South Florida with experts that deliver effective business IT solutions. We offer services that include Managed IT, Cloud Solutions, Cybersecurity Solutions, Business Continuity and so much more. Our daily goal is to help small and medium-sized businesses, like yours, get a real return on their technology investments. Let us help you reduce the risks of downtime, and downtime costs, by being your managed IT services partner. We will take care of all your technological needs so you can focus on what really matters, your customers and their needs.