A primary function of most businesses is to maximise revenue while keeping associated costs under control. Today, for the majority of major businesses, IT services are no longer a “required” support function but a critical business driver, instrumental to growth and business success.
In our digitally enhanced world, understanding the impact of IT disruption and downtime helps prioritise steps to build resilience and justify future investment.
The basic economic principle for a business is: Revenue - Costs = Profit
Networks and systems are an organisation’s lifeblood, and our dependence on IT operations is paramount to business continuity.
Today, when IT stops, business stops. Disruption to the regular order of business can have a huge impact, even for seemingly small events.
IT failure and unexpected downtime, even if only for a few minutes, can incur enormous costs, sometimes obvious but often hidden. And sometimes, a failure can effectively shut down your business.
According to Gartner, the average cost of network downtime is around $5,600 per minute. That is around $300,000 per hour. However, this is just an average and there is a large degree of variance, based on the characteristics of your business and environment.
Beyond the direct loss in revenue andRevenuewhich can be crippling, downtime creates inefficiencies, which has a ripple effect across multiple areas of your business.
Although overall costs will vary from business to business, one thing is sure: the consequences of downtime are never positive.
There is a clear loss of revenue, such as your e-commerce website being down. This is a clear and measurable example.
But more frequently, there are also IT issues that undoubtedly impact revenue.
We can all think of numerous examples within our own business, because it has almost always happened before!
The bigger the company, the more employees are sitting around not working, contributing, or generating output during an outage. Salaries are a fixed cost, and response teams may also incur additional overtime costs to help recoup lost time.
There is also the knock-on effect of lost productivity. If one step in the process stops, this directly impacts any step further down the line. This is a typical example of an intangible cost.
Of course, this has a direct impact on an IT department, diverting an already stretched resource towards problem-solving rather than priority activities.
Then, there are several other recovery costs accrued while fixing the issue:
The (unbudgeted) costs of restoring and repairing the IT system or replacing IT equipment due to failure. You may also need external expertise to get your systems back up and running.
If the failure means a breach of an SLA (Service Level Agreement), there could be penalties or businesses working in regulated industries could lose certification and contravene compliance requirements for continued business.
If a customer feels that the service failure has caused them damage or is associated with a security breach, it could result in a lawsuit and costly litigation fees.
Even if an outage lasts only a few minutes, it can easily damage or destroy a day’s worth of data and catching up can be an extensive and time-consuming process.
In a manufacturing process, materials can be damaged due to an outage, or finished goods may not meet the necessary quality requirements, making them unusable and causing a large loss in write-off costs.
Then, there are the costs that are more difficult to quantify. These indirect, intangible costs can be more challenging to quantify but are equally negative in their impact, causing large inefficiencies that shouldn’t be ignored.
Today, with IT as a critical business function, downtime means reduced business competitiveness, which can allow competitors to gain your business.
Importantly, any downtime sets off a ripple effect of inefficiencies.
IT teams are directed towards problem-solving. Answers to questions take a few more hours to reach their recipients. Managers are engaged to check that the impacted users/systems are now functioning. Senior management assesses the impact on business, implementing initiatives that divert staff away from core activities, reducing overall business output.
Customer attraction and retention can be lengthy processes, but purchase decisions can be fleeting. If systems are down when a potential customer is trying to engage with or purchase from you, they may simply move on. You lose that immediate transaction and future transactions with the customer.
Similarly, long-standing contracts up for renewal might suffer with existing clients jumping ship if service delivery expectations haven’t been met.
Notwithstanding that downtime impacts an employee’s ability to get work done, it raises doubts about the company’s viability and the competence of the IT team.
Disruptions to systems divert IT teams away from other critical projects and interrupt progress, increasing the pressure on already stretched IT teams and damaging employee morale and talent retention.
If you’re an IT Manager negotiating budget allocation to keep the “lights on” 24x7, calculating the true cost of downtime will help you build a strong business case—not just to implement preventative measures and a support structure but also to improve efficiency and realise significant cost savings.
In many instances, downtime is related to how the systems, software and technology are configured and administered, and training can help reduce this downtime.
Proactive (and effective) network monitoring ensures you can quickly detect, diagnose and resolve any network performance-related problems before they become an issue, end users become aware of them and they impact business operations.
Build redundancy into your network and critical business services. Identifying your critical and dependent services helps plan for potential outages. Whether spare equipment, automated scripts to bring backups online, or an “Out of Hours” IT Network Operation Centre (NOC) function, there will be multiple paths to maintaining service in the event of a failure, even if the failure occurs at night.
Something you should hopefully never need, a formal disaster recovery plan outlines the recovery process, so that everyone knows what is required rather than figuring it out under the pressure of an outage.
Prepare for critical security threats—not all outages are accidental. DDoS attacks are responsible for more than one-in-five unplanned outages. Whether you outsource cyber security or manage threats in-house, it’s vital to stay on top of the latest cyber threats with appropriate security technologies and processes.
Even with internal precautions in place, you should know who to call in the event of an outage and how to escalate an incident internally and to 3rd-party suppliers. You should also know your SLAs with any 3rd parties to avoid unnecessary response delays.
Naturally, it’s not possible to predict the time of day when an IT outage will occur. So, at the least, you should have a designated ‘on-call’ IT engineer available outside regular business hours, including weekends.
In fact, with today’s users (and customers) expecting Amazon-type levels of uptime and knowing the impact of downtime on productivity and revenues, if you do not have the luxury of your own 24x7 Network Monitoring or IT Service Desk, there are specialist 24x7 NOC service providers who will provide a highly cost-effective safety net—whether ‘Out of Hours’ or fully 24x7 (it’s something we know quite a bit about).
An outsourced specialist Network Operations service provider can be a smart move to help you maintain uptime, build resilience and improve your organisation’s efficiency and effectiveness. It will be bespoke to your needs and provide as much (or as little) support as you need.
No business is completely immune to unexpected downtime, but there’s a lot that can be done to reduce the number of incidents, time and associated costs and ultimately ensure the revenue health of your business, including crucial factors such as brand reputation and customer loyalty.