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

Downtime, Outages, and Outages: Understand your real costs

• April 11, 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.

Dealing with system downtime

Despite the efforts that have been invested in infrastructure resilience, many IT organizations continue to deal with database, hardware and software outages that last from a few minutes to several days, making them completely inoperable for the business and causing enormous losses.

expected downtime

Sometimes the world of IT outages can feel uncomfortable.

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

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

This is counterintuitive...

IT downtime review

While IT professionals face periods of downtime from time to time and focus their efforts on overcoming them, the business organization as a whole is impacted by "financial pain" which is often quite significant.

In the past, we've delved deep into the various ways IT downtime can impact bottom-line operations (you can read more about that here:Cost and scope of unplanned outages). In doing so, we consider different aspects, from direct sales losses and reputational damage to indirect effects such as reduced productivity.

Now I want to look at the problem and explore how organizations should address and assess threats to their IT operations, including systems, applications and data, looking at solid (and established) benchmarks that pose potential costs of downtime and disruption.

System failures:
Measuring the failures of big brands

When should the industry start measuring the financial impact of major brand failures like the one that recently occurred?Facebook, ANDone that affected 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 and predict the impact of future outage incidents?

Well, apparently, at some point, the outage creates an impact that PR cannot ignore. This is the point of no return, followed by financial impact estimates.

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

To give an IT outage a numerical value, its impact on various organizational and business aspects must be predefined so that 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: Possible data loss 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 need to be available 24/7, and internal (let alone external) end users around the world need to rely on data center availability (for critical data and application availability) at all times .

Well, reality bites. This is not the case in the back office (ie inside the data center). No organization enjoys 100% uptime. Should you try to reach 100%? Safe. However, you also need to develop a deep understanding of the impact of downtime and ways to minimize it.

Worst blackout nightmare ever? Probably what happened to you...

Some past blackout incidents have turned into PR disasters, like the mythological 2010 Virgin Blue disaster or the more recent one that devastated Facebook.

Why? The huge impact likely had something to do with it.

As a reminder, the Virgin Blue outage prevented passengers from boarding flights for 11 days (!!), resulting in negative press, reputational damage and millions of dollars in losses.

More specifically, Virgin Blue's reservation management company, Navitaire, ended up compensating Virgin Blue for over $20 million (Navitaire Booking Error Nets Virgin $20 Million in Compo).

There are many other incidents that still attract media attention. Here is just a recentUSA Today article on the Wells Fargo power outagethat prevented customers from accessing their accounts for many hours.

I can safely say that anyone in IT would agree that failures or downtime are VERY bad for business. They are undesirable, very harmful financially and must be fought with all available means.

Configuration errors are fundamental

The IT Process Institute's Visible Operations Handbook historically reported that "80% of unplanned outages are due to poorly planned changes made by administrators ("operations personnel") 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 a2014 Gartner Analysis).

The average hourly cost of corporate server downtime worldwide, 2017-2018:

Source:political

Application maintenance costs are increasing by 20% per year. But that can't solve all your problems. Previous industry research found that at least a quarter of surveyed downtime was caused by configuration errors. (How much will you spend on app downtime this year?).

How common is downtime or outage?

Okay, so downtime can be a financial nightmare. That part is clear. However, if you want to properly assess the potential risk of disruption in your organization, the immediate question must be, "How likely is this to happen?"

Source:data center knowledge

Okay, failures are too common to think "I probably won't have a major failure". Now the question arises how you can calculate your specific risk for your company.

Production and application downtime costs clarified

Unplanned outages rely on the IT department to fix them. However, as I mentioned earlier, these outages ultimately affect the entire organization.

An important part of a thorough default risk assessment process is estimating how much money you will lose per hour (or minute, or whatever time frame you choose) as a result of default.

For organizations that rely solely on the capacity of datacenters to deliver network and IT services to customers, such as For companies such as telecom service providers or e-commerce companies, downtime can be particularly costly, with the cost of a single event more than $1 million (over $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 say their availability needs to be greater than 99.999%.

Source:Searchcio Techtarget

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

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 a 12-month period; 23% said they incur costs ranging from $12,000 to 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 in 2017 because of a power outage, the losses from a single power outagecan reach more than 150 million 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 a company with at least 10,000 employees) and assume that it pays IT staff members an average of $56 per hour, then (assuming all of IT is busy sorting out time downtime) working alone is part of that. for a company of this size would come to $896,000 per week, which is equivalent to over $46 million per year (Assessing the financial impact of downtime).

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

Has the industry been able to learn from the past and minimize collateral damage during an outage?

How have things changed from the past?

So, we already know that there is still downtime and disruptions that the industry has yet to successfully eliminate. But how have costs changed over time? Are these incidents less harmful today?

Em 2010,an investigation 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 large online brokerage agencies (How to quantify downtime).

According to a survey of IT managers conducted during these years, companies are becoming increasingly aware of the direct financial costs of computer failures. The survey found that one in five companies are losing $12,000 per hour due to system outages (How to quantify downtime).

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

As early as 2004, a conservative estimate by Gartner put the cost per hour of computer network downtime at $42,000. As a result, a company that suffers more than an average of 175 hours of downtime per year can lose more than $7 million per year. However, the cost of each outage affects each 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 are all more reliant on data systems these days). Here's how to understand why past data can be multiplied by a meaningful 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 over $5,000 per minute), an account numbergardener, remained the same until 2014. The previous Ponemon Institute study mentioned above calculated the minimum, average, average, and maximum cost per minute of unplanned outages based on information from 41 data centers. It turned out that the highest cost of an unplanned outage exceeds $11,000 per minute.

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

it just makes more sense

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.

E2015 ITIC-Umfrageclearly demonstrated that the cost per hour (compared to 2008 data) has increased by 25-30%.

Impact of downtime per year

A previous Gartner analysis estimated that downtime could be as high as 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?

After2011 investigationrevealed that while the industry has been successful in combating the downtime epidemic and reducing its incidence, we are still seeing significant downtime and huge revenue losses (source:resulted in over 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 failure includes lost customers (both short and long term) and other tangible items that reflect the cost of reputational damage such as: B. Out of stock, marketing times (crisis management and recovery from mark) and the media budget needed to reboot and polish. the profile of an organization.

Which parameters should affect your calculation?

When trying to estimate the cost of downtime, there are obvious direct costs (eg lost business during downtime). However, many indirect costs must also be calculated, such as employee overhead or reputation issues mentioned above.

Staffing costs derive from the cost of exhausting “war room” tasks focused on getting IT systems up and running again, the cost of being late on all other scheduled tasks, the cost of staff overtime (if applicable ) and much 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 calculating 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 is also the impact of lost sales. To get an accurate estimate of total lost sales, the impact percentage needs to be increased to reflect the true lifetime value of customers permanently switching to a competitor. For example, the Facebook (and Whatsapp) outage mentioned above.Unconscious Costs: Denying the True Cost of Network Downtime. How much revenue is lost if these users send fewer billable ad impressions?

Stocks fell 25%

Although it is difficult to quantify so many parameters, they are significant and significant. For example, when Amazon.com was offline for several hours in its early days, its inventory dropped 25% in a single day (Unconscious Costs: Denying the True Cost of Network Downtime)!

In thatAmazon Cloud outageFor example, the company continued to struggle to get 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 that they should be compensated for downtime as part of their SLA.

I know you're curious: in terms of the 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 from unexpected server or business application downtime?

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

How to minimize the risk of interruptions and stoppages?

Downtime and crashes 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.

Evolved change analysisdeveloped a unique AIOps solution that focuses on the changes that are the root cause of performance issues. Evolven helps the company's IT and cloud operations teams prevent and correct incidents before they start.

contact usto see how we're helping leading companies dramatically reduce incidents and MTTR.