Downtime, failures and breakdowns – Understand the true costs (2023)

Downtime, failures and breakdowns – Understand the 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 make huge investments. Unfortunately, these investments do not always deliver full performance.

Coping with system downtime

Despite the efforts that have been put into infrastructure resilience, many IT organizations continue to deal with database, hardware and software downtimes lasting from just a few minutes to several days, completely incapacitating the business and cause huge losses.

expected downtime

The world of IT outages can sometimes seem uncomfortable.

Despite the variety of advanced solutions and the growing amount of data being collected by major enterprise software vendors and IT departments (from ERP to CRM and more), outages are still a valid and daunting threat to the industry.

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

This is counterintuitive...

IT downtime revised

While IT professionals experience downtime from time to time and then focus fully on managing it, the business organization as a whole suffers "financial pain" from effects that are typically very significant.

In the past we've delved deeply into the many ways in which IT downtime can impact the bottom line of organizations (you can read more about it here –Cost and scope of unplanned outages). We looked at various aspects, from direct sales losses and damage to reputation to indirect effects such as loss of productivity.

Now, I want to revisit the topic and examine how organizations should address and assess threats to their IT operations, including systems, applications and data, by analyzing robust (and established) benchmarks that represent the potential costs of downtime and outages .

System failures:
Measuring the failures of big brands

When should the industry start measuring the financial impact of large brand failures like those that have occurred recently?Facebook, Dieone that hit hundreds of thousands of Lloyds Bank customers, or theJetstar failurethat caused hundreds of flight delays?

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

Well, apparently at some point the outage has an impact that cannot be ignored PR-wise. That's the point of no return, followed by estimates of the financial impact.

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

Putting 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.

I'm sure you would agree that today's data centers should never go down; Applications need to be available 24/7, and internal (let alone external) end users worldwide need to be able 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 (i.e. within the data center). No organization enjoys 100% uptime. Should you want to achieve 100%? Secure. But you should also develop a deep understanding of the impact of downtime and ways to minimize it.

The worst nightmare of all time? Probably what happened to you...

Some previous outages have turned into PR disasters, like the mythological Virgin Blue debacle of 2010 or the most recent one that affected Facebook.

Why? The mass 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 reservations management company, Navitaire, eventually compensated Virgin Blue for more than $20 million (Navitaire booking error brings Virgin $20 million into compo).

There are many other incidents that still attract media attention. Here's just a recent oneUSA Today article about Wells Fargo outagewho 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 damaging financially and must be combated with all available means.

Misconfigurations are key

The IT Process Institute's Visible Ops Handbook has reported in the past that "80% of unplanned outages are due to poorly planned changes made by administrators ('ops') 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 (per a2014 Gartner-Analyse).

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

Those:statesman

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

How common is downtime or breakdowns?

Ok, downtime can be a financial nightmare. That part is clear. But if you want to properly assess the potential risk of failure for your business, the immediate question should be, "How likely is it to happen?"

Those:data center knowledge

Ok, so failures are far too common to be ignored by thinking "I probably won't see a major failure". Now the question arises as to how you can calculate the specific risk for your company.

Production and application downtime costs made transparent

Unplanned outages must be resolved by IT. Nonetheless, and as already mentioned, at the end of the day these failures affect the entire organization.

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

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

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

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

Those:Searchcio Techtarget

To get a thorough 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 over a 12-month period; 23% said they incur costs between $12,000 and more than $1 million per hour.

Over 35% admitted they are unsure of the cost of an outage to their business.

If you ask Delta Airlines, which had to cancel 280 flights due to one failure in 2017, the losses from a single failurecan reach over 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 they pay an IT team member an average of $56 an hour, then (assuming all IT does it). is to fix the downtime) just work Some downtime for a company this size would reach $896,000 per week, which is more than $46 million per year (Assessing the financial impact of downtime).

Of course, the reality is more complicated since you have to take into account many parameters such as the time of the event (mid-week or weekend? day or night?) and more. However, understanding the cost of downtime goes a long way in estimating your exposure to risk and the ROI of tools that can help minimize the impact of downtime.

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

How have things changed from the past?

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

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

In 2009 it was reported that the average cost of downtime varies significantly by industry, from about $90,000 per hour in the media sector to about $6.48 million per hour for large online brokers (How to quantify downtime).

According to a survey of IT managers conducted during these years, companies are becoming more aware of the direct financial cost of computer failures. The survey found that one in five companies loses $12,000 an hour from system downtime (How to quantify downtime).

As mentioned above, later analysis conducted by Gartner 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 hourly cost of computer network downtime at $42,000. Accordingly, a company that suffers an above-average 175 hours of downtime per year can lose more than $7 million annually. However, the cost of each outage 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 downtime will only increase over time (since we all rely more on data systems today). You can therefore understand why past dates can be multiplied by a significant number to reflect today's reality...

Every minute counts

More than a decade ago, the average cost of data center downtime across industries was estimated at approximately $5,600 per minute (Unplanned IT outages cost more than $5,000 a minute), a number accgardener, remained the same until 2014. The previous Ponemon Institute study referenced above calculated the minimum, mean, mean, and maximum cost per minute of unplanned outages, based on inputs from 41 data centers. The largest cost of an unplanned outage has been found to exceed $11,000 per minute.

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

It only gets more meaningful

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

AITIC survey 2015clearly shown that hourly costs have increased by 25% to 30% (compared to 2008 data).

Impact of downtime per year

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

How have things changed?

a later oneResearch from 2011revealed that while the industry has been successful in combating the downtime epidemic and reducing its frequency, we are still seeing significant downtime and huge revenue losses (source:resulted in over 3 million (apparently Whatsapp users) migrating to Telegram)

The impact on reputation and loyalty

How much is your business 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 reputational damage, such as inventory declines, marketing time (crisis and brand recovery management), and media budget required to restart and revitalize the profile of an organization.

Which parameters should influence your calculation?

When trying to estimate the cost of downtime, there are the obvious direct costs (e.g., lost business during the downtime). However, many indirect costs such as employee overheads or reputational issues mentioned above should also be factored in.

Personnel costs come from the cost of firing “war room” tasks focused on getting IT systems up and running again, the cost of delays in all other scheduled tasks, the cost of staff overtime (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.

Of course, you need to calculate these costs when estimating the impact of downtime, as they are usually very significant. But even a rough estimate can prove extremely helpful in understanding the risks and deciding what level of technology to lean on to combat them.

There's 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 actual lifetime value of customers who permanently switch to a competitor. For example the Facebook (and Whatsapp) outage I mentioned earlierCost Conscious: Denying the true cost of network downtime. What loss of revenue results from these users serving fewer billable ad impressions?

Stock down 25%

Although it is difficult to quantify so many parameters, they are significant and significant. For example, when Amazon.com went offline for several hours in its early days, its stock fell 25% in a single day (Cost Conscious: Denying the true cost of network downtime)!

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

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

Downtime costs: Calculate yourself

How much do you have to lose from an unexpected server or business application failure?

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

How can the risk of breakdowns and downtime be minimized?

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

Evolved change analysisDeveloped a unique AIOps solution that focuses on change - the true cause of performance incidents. Evolven helps enterprise IT and cloud ops teams prevent and resolve incidents before problems occur.

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