Article What is the Real Cost of Downtime?
By Insight UK / 7 Nov 2019
By Insight UK / 7 Nov 2019
IT failures affect everyone, limiting the ability of people and systems to function at optimum levels.
But downtime is something more serious in that it means a system doesn’t work at all. Downtime could be as simple as a cloud application not working, or a devastating infrastructure failure that cripples an entire organisation.
Downtime does not discriminate. It affects small businesses and large organisations alike and the results can be devastating.
In 2017, a power supply failure caused physical damage to British Airway’s data centre, taking out the airline’s IT systems. This cancelled flights, stranded passengers, and separated luggage. The company estimated the cost of this outage was more than £80 million, a figure inflated by compensation costs and the fact it occurred on a busy bank holiday weekend.
Meanwhile, a poor IT migration project at TSB saw bank customers locked out of their accounts, with mobile and online services also taken out. TSB’s parent company placed the cost of the incident at more than £180 million – along with significant damage to the bank’s reputation.
The incidents lay bare the potential cost of downtime to a business. But what is the real cost of downtime?
Gartner estimates the average cost of downtime is $5,600 per minute which equates to more than $300,000 an hour. But it must be stressed that this is an average figure that doesn’t take into account the unique characteristics of your business and your industry or even the timing and nature of the outage.
For example, a payment system failure at a high street retailer lasting for one hour on a Saturday afternoon would be more catastrophic than an inability for HR staff to access email during the same period. An incident in the leadup to Christmas would also be more serious.
Similarly, an outage at an organisation that offers unique services may not be as catastrophic as an incident at a retailer whose products are commoditised. For example, someone looking to pay their tax bill at HMRC can’t go anywhere else, but someone looking to purchase batteries might go to a rival.
It’s tempting to inflate the overall cost of impact in order to secure funding for IT projects that help mitigate the threat. However, such an approach is counterproductive as it doesn’t provide an organisation any insight into how many resources it should devote to mitigating the threat of downtime and where these resources should be deployed.
The cost of downtime should include the loss of revenue per working hour and the cost of salaries. It should be easy to identify lost sales and to calculate the amount an organisation is paying staff who are unable to work because the systems they rely on are not functioning.
The figure should also include the additional costs incurred from the restoration of IT services and any legal fees or penalties such as compensation.
Indirect impacts should not be considered. For example, although damage to reputation is a serious consequence that can contribute to a potential loss of revenue in the future, it does not contribute to the overall cost of downtime.
By using real costs an organisation can identify the departments and systems that are most critical to the business and, therefore, revenue generation. This allows for the prioritisation of resources that mitigate the impact of downtime and minimise cost.
The use of managed IT services can help. Insight Managed Infrastructure reduces the risk of downtime by offering proactive maintenance. We have powerful monitoring capabilities that predict any issues before they happen.
This differs greatly from reactive support, which only comes into effect after disruption occurs. Security is boosted by automatic updates and patches – reducing the risk of an attack affecting availability.
And because Insight Managed Infrastructure is a subscription service, finance departments have greater cost predictability.