The True Costs of IT Downtime

May 6, 2014 - by Synoptek

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Your IT managers, CTOs, and data center managers understand that system downtime can be very expensive for your business, but do YOU know the actual costs behind those IT outages?

IT outages can result in a plethora of both direct and indirect costs that may have both short term and long term repercussions including reduced sales, lost inventory and squandered labor and marketing expenses which can result in a decrease in stock value and negative brand damage that will send prospects and customers to your competition.

Downtime Impacts Your Revenue

When an IT outage strikes your business, the process of returning your systems to full functionality requires the allocation of excessive amounts of revenue impacting resources to the problem. To measure the costs accurately you must include employee time diverted to get the systems working, overtime expenses, lost data, emergency fees during off hours, and long term repair costs.

A recent study by IT industry analyst firms found that on average a business can lose between $84,000-$108,000 during every hour during an IT outage. The average loss was even higher in the financial services, technology, and healthcare industries.

Several real life case studies have recently come to light. A wide scale IT outage was blamed for taking down Australian airline, Virgin Blue’s, check-in and reservation systems for 11 days which had an overwhelming effect on 50,000 passengers and 400 flights. Estimates on the effect of the IT outage on lost revenue for the airline are upwards of $20 million.

According to Dunn & Bradstreet, 59% of Fortune 500 companies experienced 1.6 hours of IT downtime per week. The loss of labor due to an IT outage costs an organization of this size around $896,000 weekly, equivalent to $46 million per year. For a medium sized organization, the hourly costs may be lower, but the impact of lost opportunity is proportionally much larger.

Downtime Impacts Opportunity & Reputation

According to the IT Process Institute, the average outage period is around 200 minutes. During this time, labor and productivity are greatly diminished which on the surface might seem to be the only loss. However, during those 200 minutes one must also account for the loss of sales opportunities, customer dissatisfaction, and impact on the company’s reputation. Rebuilding your organization’s reputation after an IT outage is mandatory in order to maintain strong relationships with your customers. This process may require marketing and media costs to replenish the brand image, and in some cases compensation for your most valuable customers. Active marketing campaigns can also be costly during an IT outage. If you are running pay per click Ads that take prospects to your down website, you will be wasting valuable marketing dollars and leaving your prospects with a negative first impression.

Conclusion

Measuring the real costs of IT downtime goes beyond your IT department, and impacts all aspects of your business. Customers expect your website and other systems to be guaranteed to be available whenever they need it, and your employees require the same ability to be successful. Synoptek believes in delivering the most advanced, reliable, secure, and scalable IT Support to help you save money and your company’s reputation. With the confidence that comes with knowing that your IT is in the right hands, you can focus on what you do best for growing your business.