Downtime, outages and interruptions: understand your real costs (2023)

Downtime, outages and outages: Understand your true costs

• 11. April 2019
• Written by: Gad Cohen

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When it comes to mission-critical applications or data center performance quality, companies are willing to invest heavily. Unfortunately, these investments are not always fully delivered.

Against system failure

Despite the efforts that have been invested in infrastructure resilience, many IT organizations continue to struggle with database, hardware and software failures lasting from a few minutes to several days, completely shutting down the business and large cause losses.

expected downtime

The world of IT outages can seem strange at times.

Despite the variety of advanced solutions and the growing amount of data being collected by leading enterprise software vendors and IT departments - from ERP to CRM and more - outages remain a valid and serious threat to the industry.

On the other hand, IT outages have somehow become an inherently accepted, even expected, part of business life.

That's counterintuitive...

IT downtime review

While IT professionals experience downtime from time to time and then focus their efforts on overcoming it, the business organization as a whole suffers the "financial pain" that is usually quite significant.

In the past, we've taken a closer look at the various ways IT downtime can impact business outcomes (you can read more about this here:Cost and scope of unplanned outages). In doing so, we consider different aspects, from direct sales losses and damage to reputation to indirect effects such as reduced productivity.

Now, I want to return to the topic and examine how organizations should address and assess threats to their IT operations, including systems, applications and data, by looking at robust (and established) benchmarks that represent the potential costs behind downtime and disruption .

System failures:
Measuring the failures of big brands

When should the industry start measuring the financial impact of major brand disruptions like the one that occurred recently?Facebook, Öone that reached hundreds of thousands of Lloyds Bank customers, or theJetstar failurethat caused hundreds of flight delays?

In other words, at what point is an outage "significant enough" that a cost analysis becomes valuable for the industry to learn from and predict the impact of future outage incidents?

Well, apparently at some point the disruption creates an impact that PR-wise can't ignore. This is the point of no return, followed by estimates of the financial impact.

The cost of downtime varies significantly between industries. The size of the affected company is of course a critical but not the only important factor. The role of the IT systems in the company is also crucial.

Defining a numeric value behind an IT outage means pre-defining its impact on multiple business and organizational aspects so the entire industry can learn and optimize accordingly.

A failure of a critical application can result in two different types of losses:

• Application service outage: The impact of downtime varies by application and organization;
• Data Loss: The potential loss of data due to a system failure can have significant legal and financial implications.

Well, I'm sure you'll agree that today's data centers should never go down; Applications must remain available 24/7, and internal (let alone external) end users around the world must be confident that data centers are always available (for critical data and application availability).

Well, reality bites. This is not the case in the back office (i.e. within the data center). No organization enjoys 100% uptime. Should You Try to Achieve 100%? Clear. However, you also need to develop a deep understanding of the impact of downtime and ways to minimize it.

Worst blackout nightmare in history? What probably happened to you...

Some past blackouts have turned into PR disasters, like the mythical Virgin Blue disaster in 2010 or the recent one that struck Facebook.

Because? The massive impact probably had something to do with it.

As a reminder, Virgin Blue's outage prevented passengers from boarding flights for 11 days (!!), resulting in negative press, damaged reputations and millions in losses.

More specifically, Virgin Blue's reserve management company, Navitaire, eventually compensated Virgin Blue for more than $20 million (Navitaire's booking decision gives Virgin $20 million in compo).

There are many other incidents that still attract media attention. Here's a current oneUSA Today article on the Wells Fargo power outagewho prevented customers from accessing their accounts for many hours.

It's safe to say that anyone in IT would agree that failures or disruptions are VERY bad for business. They are undesirable, very damaging financially and must be combated with all available means.

Configuration errors are key

The IT Process Institute's Visible Operations Handbook has reported in the past that "80% of unplanned outages are due to poorly planned changes made by administrators ("operations staff") or developers" (visible operations).

The Enterprise Management Association reported that 60% of availability and performance failures are due to misconfigurations.

How much does it cost?

Downtime can cost organizations $5,600 per minute and up to $300,000 per hour in web application downtime (according to aAnalyse Gartner 2014).

Average cost per hour of downtime for enterprise servers, worldwide, 2017-2018:

Fuente:Politically

Application maintenance costs are increasing at 20% annually. But that can't solve all your problems. Previous industry studies have found that at least a quarter of the downtime surveyed is due to configuration errors. (How much will you spend on app downtime this year?).

How common is downtime or disruption?

Granted, downtime can be a financial nightmare. That part is clear. But if you want to properly assess the risk potential of business disruption, the immediate question should be, "How likely is that?"

Fuente:data center knowledge

Admittedly, failures are too common to ignore the thought, "I probably won't have a major failure." Now the question is how do you calculate the risk specific to your business.

Clarified production costs and app downtime

Unplanned outages are resolved by IT. However, as I mentioned earlier, these outages ultimately impact the entire organization.

An important part of a complete downtime risk assessment process is estimating how much money you will lose per hour (or minute, or whatever time interval you choose) due to the downtime.

For organizations that rely solely on the ability of data centers to provide IT and network services to customers, such as For example, telecom providers or e-commerce companies, downtime can be particularly costly, with the cost of a single event reaching $1 million (more than $11,000 per minute) according to expert estimates.

In a USA Today survey of 200 data center managers, more than 80% said their downtime costs exceeded $50,000 per hour. More than 25% reported downtime costs of more than $500,000 per hour (!!).

According to another survey, while companies cannot achieve zero downtime, one in ten companies indicated that their availability should be greater than 99.999%.

Fuente:Searchcio Techtarget

To get a solid understanding of the impact of production and release downtime, let's take a look at how the consequences of downtime manifest themselves.

Downtime costs: per year or per incident?

AStudy 2017found that 46% of 400 IT decision makers experienced more than four hours of IT-related downtime in 12 months; 23% said they incur costs between $12,000 and more than $1 million per hour.

More than 35% admitted they are unsure of the cost of a business interruption.

If you ask Delta Airlines, which had to cancel 280 flights due to disruptions in 2017, the losses from a single disruption incidentcould reach more than 150 million US dollars.

A few years ago, Dun & Bradstreet reported that 59% of Fortune 500 companies experience at least 1.6 hours of downtime per week.

If you take an average Fortune 500 company (or any company with at least 10,000 employees) and assume that it pays IT staff an average of $56 an hour, then (assuming all IT employs it is to fix the downtime), part labor alone - downtime for a company this size would be $896,000 per week, which works out to over $46 million per year (Assessing the financial impact of downtime).

The reality is of course more complicated, since many parameters have to be taken into account, such as: B. the time of the event (weekdays or weekends? day or night?) and much more. However, understanding the cost of downtime will go a long way in assessing your potential risk and return on investment from tools that can help minimize the impact of downtime.

Could the industry learn from the past and minimize collateral damage during an outage?

How have things changed since the past?

So we already know that downtime and power outages are still happening today and that the industry is not yet able to eliminate them. But how have costs changed over time? Are these incidents less harmful today?

ab 2010,a poll by Coleman Parkesfound that IT downtime costs companies a total of more than 127 million hours per year in employee productivity, an average of 545 hours per company.

In 2009, the average cost of downtime varied significantly by industry, from about $90,000 per hour in the media industry to about $6.48 million per hour for major online brokers (How to quantify downtime).

According to a survey of IT managers over the years, companies are increasingly aware of the direct financial cost of computer failures. Research has found that one in five businesses is losing $12,000 an hour due to system downtime (How to quantify downtime).

As mentioned above, a subsequent analysis by Gartner in 2014 found average costs of $5,600 per minute and more than $300,000 per hour.

As early as 2004, a conservative estimate by Gartner put the cost of computer network downtime at $42,000 per hour. As a result, a company with less than 175 hours of downtime per year can lose more than $7 million per year. However, the cost of each disruption affects every business differently, so it's important to know how to calculate the exact financial impact (How to quantify downtime).

It makes sense to think that the cost of disruption will only increase over time (since we now rely more on data systems). Here's how to understand why past data can be multiplied by a significant number to reflect current reality...

Every minute counts

More than a decade ago, the average cost of data center downtime across all industries was estimated at approximately $5,600 per minute (Unplanned IT outages cost more than $5,000 a minute), appreciate that, secondgardener, remained the same until 2014. The previous Ponemon Institute study referenced above calculated the minimum, mean, average, and maximum cost per minute of unplanned outages, based on information from 41 data centers. The highest cost of an unplanned outage was over $11,000 per minute.

On average, the cost of an unplanned outage is likely to be over $5,000 per minute.

It just becomes more meaningful

AStudy 2013saw an increase of more than 41% over the previous averages described above and an average cost of more than $7,900 per minute.

LikeITIC-Umfrage 2015clearly shown that the cost per hour (compared to 2008 data) increased by 25-30%.

Impact of downtime per year

A previous Gartner analysis calculated that downtime can average 87 hours per year. Obviously this is the sum of many interruptions from a few minutes to several hours (The average large enterprise experiences 87 hours of network downtime per year).

How have things changed?

laterSurvey 2011found that while the industry has been successful in addressing the downtime epidemic and reducing its incidence, we are still seeing significant downtime and huge revenue losses (Source:resulted in more than 3 million (apparently WhatsApp users) switching to Telegram)

The impact on reputation and loyalty

How much is your company's reputation worth? This can be extremely difficult to assess, as can the long-term impact of a damaged reputation and its impact on sales and profitability.

In this case, the cost of downtime includes lost customers (both short- and long-term) and other tangible items that reflect the cost of reputation degradation, such as an organization's profile.

What parameters should affect its calculation?

When attempting to estimate the cost of downtime, there are obvious direct costs (e.g., lost business during downtime). However, there are also many indirect costs to consider, such as: B. Personnel expenses or the above-mentioned reputation problems.

Personnel costs come from the cost of burning out “war room” tasks aimed at getting IT systems up and running again, the cost of being behind on all other scheduled tasks, the cost of staff extras (if applicable) and more. Add to this the value of data loss, emergency maintenance fees (especially if the outage occurs outside of business hours), and additional repair costs that can persist long after service is restored.

It goes without saying that you should consider these costs when estimating the impact of downtime, as they are often very high; But even a rough estimate can be extremely helpful in understanding the risks and deciding what level of technology to rely on to combat them.

There's also the impact of lost sales. To get an accurate estimate of total lost sales, the hit rate needs to be increased to reflect the true lifetime value of customers who permanently switch to a competitor. For example, the Facebook (and Whatsapp) outage mentioned above.Unconscious Costs: Denying the true cost of network downtime. What is the revenue loss due to these users experiencing fewer billable ad impressions?

Inventory down 25%

Even if it is difficult to quantify so many parameters, they are still substantial and meaningful. For example, when Amazon.com was offline for several hours in the first few days, its inventory dropped by 25% in a single day (Unconscious Costs: Denying the true cost of network downtime)!

DarinAmazon Cloud OutageFor example, the company continued to fight to bring its cloud services back online. As a result, many customers questioned the reliability of their cloud and Amazon's communications surrounding the outage. Other customers felt they should be compensated for downtime as part of their SLA.

I know you're curious: In terms of SLA, Amazon's EC2 SLA was not breached despite the nearly four-day outage (Seven lessons from the Amazon outage).

The cost of downtime: Calculate it yourself

How much will you lose due to unexpected server or business application downtime?

According to various sources, the easiest way to calculate potential lost revenue during an outage is to use this equation:

How to minimize the risk of disruptions and downtime?

Downtime and failures are catastrophic, but they don't have to be overly shocking. By using solutions that focus on getting to the root of the problem, failures can be prevented before they happen.

Developed change analysishas developed a unique AIOps solution that targets changes that are the true cause of performance incidents. Evolven helps enterprise IT and cloud operations teams prevent and remediate incidents before problems arise.

Contact usto see how we are helping leading companies reduce incidents and MTTR.