A Look at the Cost of Downtime – By the Numbers

It’s easy to underestimate just how damaging downtime can be if your business has never experienced a major computer problem. A survey of small business owners illustrates this conclusion. 65% of owners estimated they would only lose $500 if their company’s network went down for a day. In reality, downtime is much more costly than $500.

In the same study it is revealed that 20% of small businesses have downtime due to a major IT accident every five years. Furthermore, of the small businesses that are hit with a major disaster, 40% will close for good. While these statistics show us the dangers of underestimating downtime, an astounding 87% of small business owners believe they are somehow immune to a catastrophic disaster.

IT disasters resulting in costly downtown and data loss can strike a business of any size and can come from a variety of uncontrollable sources, like hardware failure, human error, a hacker attack, and more. Additionally, many do not realize that downtime impacts much more than just lost revenue. Downtime will hurt your bottom line in other ways like the loss of productivity, damage control to make up for the lost time, repair expenses… the list goes on.

Amazon, for example, experienced a downtime situation lasting only two hours in June of 2008, and it’s estimated that Amazon lost $30,000 a minute during this outage. Nowadays, Amazon’s revenues are three times what they were in 2008, which would put them close to losing $100k a minute if they experienced downtime today.

In another recent study, this one by CA Technologies, 200 large companies across North America and Europe were looked at in order to determine the cost of downtime incurred from an IT outage. Of these 200 businesses, it was discovered that $26.5 billion in revenue was lost each year, which comes out to a $150,000 annual hit for each business. This study also discovered that IT outages are frequent, lengthy, and can do more than cause monetary damage. A loss incurred from downtime also hurts a company’s reputation, the morale of the staff, and customer loyalty.

While the cost of downtime will be different for every business, one thing every company has statistically in common is that downtime caused by an IT outage will put an organization at serious risk of going out of business. Use these two formulas to calculate the cost of downtime for your organization:

The first downtime formula determines loss of sales:
Yearly Revenue/Business Hours x IT Impact to Sales % = Lost Sales

The second downtime formula factors loss of employee productivity:
Employees Affected x Average Employee Cost Per Hour x Average % Affected by IT = Lost Productivity

You may be shocked to see after finding your results how expensive it would be to just lose one day of business to an IT problem. You are not alone if you don’t have a downtime solution in place, or if you didn’t think it was necessary. The CA Technologies study revealed that “56% of enterprises in North America and 30% in Europe don’t have a formal and comprehensive disaster recovery policy.”

Downtime can destroy a business. The best way to prevent downtime is to have a reliable business continuity plan in place that will keep your operations up and running, even in the event of a major disaster. A comprehensive technology management program considers the planning and the protection of your business from downtime so your organization can be best prepared to not suffer through one expensive minute of downtime!