The most crucial aspect of almost every network is availability, scalability, network performance, agility, etc. everything requires the network to actually be up and running. Gartner estimates $5,600 per minute as the cost of network downtime, which extrapolates to well over $300K per hour. However, this cost will vary on size of the business and industry, length and timing of the outage, employees affected, etc. For an example, losses are considerably higher per hour for businesses which are based on high-level information transactions, like banks and on-line retail sales. Beyond the financial outcomes, network downtime can sit on your organization’s productivity & efficiency levels. Every time users experience interruptions, it usually draws on an average 23 minutes to get them refocused on their priority tasks.
In the modern world, where almost every business is online which depends on a set of software, downtime and network performance directly affects the business metrics that we all care about. In simple words, in case if your business website is down, you are losing money. Actual money.
Even a single network outage can cost a business millions of dollars. For example – Last year in May due to a technology failure, 1000s of British Airways passengers were stranded. Later their CEO explained that this network failure had costed the business $102.19 million. This monetary estimate excludes the negative impact on the brand’s reputation. It also doesn’t include the engineering costs involved to proactively find out the root cause of this issue with manual network monitoring.
Ideally the network availability & other metrics should be monitored closely. Quite often CTOs & CIOs overlook network downtime as something that shouldn’t exist (i.e. not practical) or as something that’s is unavoidable (i.e. not true). As a matter of fact, the more an organization pays attention to IT Ops & Net Ops, the more they save on engineering efforts in the long run. The saved efforts can be placed into adding new features and paying attention to customer requests. Efforts, time and resource spent as a whole on digging into the metrics to create post-mortems or a list of action items after a critical event can be potentially saved by moving the IT ops burden on a tool.
It’s always recommended to take proactive approach rather than reactive to avoid network downtime and to build up resilience. To summarize it, similar to taking a flu shot, you should thoughtfully inject failure-proof measures into your systems to mitigate major issues down the line.
If you prefer to wait until it’s too late, then you’ve already impacted end-user experience while they’re using your service. This wouldn’t affect your bottom line immediately, but it can affect customer’s trust on your brand in the long run.
How to calculate your cost of downtime
The fact is, every organization wishes to reduce its IT costs. Besides, what if ignoring technology upgrades to reduce your IT expenses was in-fact increasing them? Power outages and failures are not the sole culprits when it comes to network downtime, it can be because of outdated hardware, human error, lack of network monitoring etc.
So how do you figure out where you actually stand in case of network downtime costs? Here’s a straightforward way to calculate this cost and eventually make out how your organization could be impacted:
Network Downtime Formula
Cost of Downtime (per hour) = Lost Revenue + Lost Productivity + Recovery Costs + Intangible Costs
The very first step would be to calculate the amount of revenue your business has generated/hour. In other words, it will be equivalent to revenue per week/40 hours. A significant component to find out your business’s lost revenue is your dependency on network uptime.
Uptime can be calculated in terms of time or overall percentage your site or service has been up and running. For an example, in case you are running an e-commerce business and you only sell your stuff online, you are completely dependent on the internet for your company’s revenue. Hence you should get an estimate or the percentage amount of your business revenue that is actually dependent on uptime.
Lost Revenue = Revenue/hr x Downtime(hrs) x Uptime (%)
For an example: If a company’s revenue is $3,000 per hour & my network was down for 2 hours & my network uptime percent is 30 so my lost revenue will be $1,800 per hour.
Due to IT outage, employees are unable to perform their jobs. However, their salaries are a hard and fast value and don’t change even throughout network downtime.
To calculate the productivity lost, you need to 1st calculate every employee’s salary per hour. Then, eventually estimate the % of productivity that’s hooked in to uptime and this might vary across staff.
(Uptime, remember, is solely the time or percentage your website is up and operational.)
This percentage you get in the end is your Utilization percentage.
Lost Productivity = Employee Salary/hr x Utilization % x Number of employees (with same Utilization %)
It is also referred to as costs accumulated while fixing the problem. It embodies, but is not restricted to:
- Replacement components
- Repair services
- Lost data recovery
- Other prices because of lost data
These might not be as tangible at revenue and productivity prices, however they’re equally as necessary when deducing your actual network downtime costs.
It is the type of cost that might affect your business from a long-term perspective. These costs take place whenever there is network downtime which eventually damages the reputation of your brand.
This will eventually affect the business that have heavy dependency on network performance or network availability. It also includes the costs that can’t be measured to find out the total network downtime cost using the given formula for a better understanding of consequences.
The Final Cost
Once you’ve calculated individual costs separately, you may now put them together in the main formula & tally your total network downtime cost.
Possible Reasons for Network Downtime
Human error is considered to be the leading cause for downtime. Dimension Data’s Network Barometer report published in 2014 cites the downtime percentage due by human error is 32%. While Avaya research states that 82% of businesses experience downtime due to human/ manual error.
Another possible reason for network downtime could be due to hardware equipment failure, or due to cooling/ temperature failure. One of the major expenses of operating a datacenter is air conditioning technology or even a liquid coolant to keep the temperature of datacenter under control. In case if your critical server is in a closed space or the AC stops working or the fan dies, there’s a high possibility that your server will get overheated, pushing the network to go down.
One way to minimize your risk of downtime is to use a network monitoring tool rather than relying on the hands-on expertise of one or two individuals in your IT dept.
Preparing for IT Downtime
Did this number surprise you?
Well, the harsh truth is that no organization is immune to the side effects of IT downtime whenever it comes to your end customer — as well as your staff’s productivity —and brand reputation in the marketplace. Downtime can prove to be extremely expensive, and in so many ways that it might make or break the success of your business.
If you would like to end the risk of IT downtime, please feel free to contact us now to find out how our network monitoring tool can minimize this risk & can help your organization.