The Real Costs of Systems Downtime
In March 2019, a 14-hour outage cost Facebook (now Meta) an estimated $90 million. Another six-hour outage hit the social media giant in October of 2021, inflicting what could have been another $38 million hit. Coincidentally, as I’m writing this, Amazon.com and Prime Video went down due to a “cloud server outage.” If mega companies and tech giants like Meta and Amazon can’t avoid downtime, clearly, we’re all vulnerable.
While Meta and Amazon can easily absorb the financial costs of the outages, small and midsized businesses (SMBs) aren’t as fortunate. SMBs reported estimated downtime costs ranging between $10,000 to $50,000 per hour in 2020. Given our reliance on technology — and technology’s inherent vulnerabilities — such events have become a near certainty.
What is the real costs of downtime and what tangible steps can you take to decrease downtime events and its associated costs?
Different companies may define downtime differently. For example, some use the term when they lose internet connectivity and cannot access their cloud-based applications. Others use the term when an in-house server or network crashes, or when their hosted eCommerce application or vendor portal goes offline. For our purposes, we’ll use “downtime” to refer to any time you cannot use one or more critical business applications — customer facing or not.
Causes of downtime
The causes of downtime are varied, but most can be attributed to one of these events:
- Natural disasters
- Network outages
- Hardware component failures
- Software bugs
- Human error
Components of downtime costs
You can find downtime calculators on the internet, most use a formula that considers annual revenue, the size of your workforce, employee cost per hour, and lost sales revenues. If you’re curious, go ahead and run the calculations, but your time might be better spent figuring out ways to avoid downtime altogether. There are other, less tangible costs of downtime too, including:
- Lost productivity
In addition to accounting and sales personnel left idle, an unplanned outage could shut down a manufacturer’s entire production line. And even when service is restored, longer-term downstream effects and workflow backups can continue for days.
- Lost business opportunities
During the Prime Video outage, millions may have switched the channel to Netflix, a costly move for Amazon. Advertising revenue is lost and we could all find a new favorite series on Netflix (here’s looking at you Tiger King 2) and not return to Prime for weeks.
Seriously though, for companies that depend on eCommerce revenue, even a short outage can result in tens of thousands in lost revenues. Downtime might also prevent employees from providing technical and sales support, driving away existing clients and dissuading prospects.
- Damaged brand image
Your software is your brand. When it goes down, your brand can sink with it. Even a single downtime event can put your company’s reputation at risk. Bad reviews and cancelled subscriptions damage your image and your bottom line.
- Data loss
Some downtime events, such as those due to cyberattack or server crash can result in corrupt, damaged, or lost data that can be difficult, expensive, and time-consuming to restore.
Prevention and mitigation
The downtime prevention and mitigation measures your organization deploys will depend on many factors. The state of your in-house infrastructure, whether you’re running primary cloud-based SaaS application, the offerings available from your hosting provider, whether you rely on a Managed Services Provider, and the level of risk you’re willing to assume are all considerations.
However, there are some universally good recommendations of ways to help prevent downtime and/or mitigate its impacts, including:
- Consider 24/7 network monitoring
- Configure multi-factor authentication
- Work to improve email security
- Use Advanced Endpoint Detection tools
- Create a disaster recovery/business continuity plan
- Use the best security software available
- Consider offsite backups and data storage
- Consistently update your software applications
- Have a planned maintenance strategy in place for equipment
- Work with the most reputable technology vendors
Engage resources to help
Staying out in front of the vulnerabilities that can lead to downtime requires a high degree of technical knowledge, time, skill, and effort — something many SMBs lack. A Managed Services Provider (MSP) like Net at Work can provide these resources, and many more — helping your organization minimize downtime events, keep your data safe, your team productive, and your customers buying.