Downtime, outages and outages: Understand your true 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.

Coping with system downtime

Despite the efforts that have been invested in infrastructure resilience, many IT organizations continue to deal with database, hardware and software downtimes lasting from a few minutes to several days, rendering them completely inoperable for 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 remain a valid and terrible 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 face downtime from time to time and then focus their efforts on overcoming it, the business organization as a whole suffers the impact of "financial pain" that is usually quite significant.

In the past, we've delved deeply into the many ways IT downtime can impact bottom line operations (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 review the problem and explore how organizations should address and assess threats to their IT operations, including systems, applications and data, by looking at solid (and established) benchmarks that represent 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, Isone 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 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 IT systems in the company is also crucial.

In order to give an IT outage a numeric value, its impact on multiple business and organizational 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: 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 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 (i.e. within the data center). No organization enjoys 100% uptime. Should You Try to Achieve 100%? Secure. 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 Virgin Blue debacle of 2010 or the most recent one that ravaged 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, reputational damage and millions of dollars in losses.

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

There are many other incidents that still attract media attention. Here's just a recent oneUSA Today article on the Wells Fargo power 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 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 a2014 Gartner-Analyse).

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

Fuente: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 app downtime this year?).

How common is downtime or disruption?

Ok, 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 should be, "How likely is it to happen?"

Fuente:data center knowledge

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

Production and application downtime costs clarified

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

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

For organizations that rely solely on the ability of data centers to provide IT and network services to customers, such as For businesses such as telecom service providers or e-commerce companies, downtime can be particularly costly, with the 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, 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 say their availability needs to be greater than 99.999%.

Fuente:Searchcio Techtarget

To gain 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 ranging from $12,000 to over $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 they pay IT team members an average of $56 an hour, then (assuming all of IT busy solving downtime) work alone is part of it Downtime for a company this size would reach $896,000 per week, which works out to over $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: B. the time of the event (weekday or weekend? day or night?) and more. However, understanding the cost of downtime greatly assists in assessing your potential risk and the return on investment of 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 since the past?

So we already know that there is still downtime and outages that the industry has yet to successfully eliminate. But how have 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 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 sector to about $6.48 million per hour for large online intermediation 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 is losing $12,000 an hour due to system outages (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 hourly cost of computer network downtime at $42,000. As a result, a company that suffers downtime longer than the average 175 hours 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 all rely more on data systems these days). 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 per minute), a number accgardener, 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 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 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.

And2015 ITIC-Umfrageclearly shown that the cost per hour (compared to 2008 data) increased by 25-30%.

Impact of downtime per year

A previous Gartner analysis estimated that downtime can average up to 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) migrating 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. Stock outs, marketing times (crisis management and brand recovery) and the media budget required to reboot and polish. the profile of an organization.

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, many indirect costs must also be calculated, such as employee overhead or the reputation problems mentioned above.

Personnel costs derive from the cost of burning out “war room” tasks focused on getting IT systems up and running again, the cost of being behind on 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.

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'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 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. How much revenue is lost if these users submit 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 went offline for several hours in its early days, its stock fell 25% in a single day (Unconscious Costs: Denying the true cost of network downtime)!

In thisAmazon 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 from unexpected server or business application downtime?

According to multiple 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.

Evolute change analysishas developed a unique AIOps solution that focuses on changes that are the root cause of performance issues. Evolven helps enterprise IT and cloud operations teams prevent and remediate incidents before they start.

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