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What is the cost of downtime?

Experiencing app, website, or server downtime can be one of the worst situations any tech business can find themselves in. Having your applications fail or crash out of nowhere can lead to some serious consequences, both directly and in the future for your bottom line and business operations. For one’s customers, the situation is worse. Imagine not being able to access a critical application. But what is the actual cost of downtime?

There are many ways to calculate the cost of downtime. One report from the Ponemon Institute in 2016 says downtime costs between $5,600 to $9,000 per minute on average. The impact of your service downtime varies from company to company, what its service is used for, how its customers are impacted, and much more. How long your downtime lasts will have the largest effect on the cost of downtime. There are data loss costs, productivity costs, and reputations costs. Let’s go over a few of the costs of downtime.

What is downtime?

Let’s kick off this guide with the basics. Downtime is a term you may have heard in the past but aren’t sure what it actually means. Downtime is when your application, website, infrastructure or other network application system is out of service and unusable.

This can occur for a variety of reasons: From hardware or software issues, an attack by a virus, even a Distributed Denial of Service (DDoS) attack. Downtime is often caused by human error, network failure, usage spike, or third-party vendor outages.

No matter what the cause may be, it’s something that every tech company is concerned about. Extended downtime has the potential to stop business growth in its tracks. You could lose both customers and reputation. Sound scary? Keep reading to learn about the effects of downtime.

The effects of downtime

Businesses these days have become dependent on IT operations and the applications and networks that support them.  While the overall costs of downtime vary from company to company, it’s never a good thing for anyone. Let’s go over what kind of negative impact downtime can have on your business.

Data Loss

One incalculable cost of downtime is the loss of data that can never be recovered. For example, systems that collect and store data from outside sources and record them might not be recording during an outage. That means, data might be missing from historical records and irreplaceable. For companies that rely on analytical software to improve their business decision, losing even a chunk of their data resources due to downtime can cause irreparable damage to their operations and business. 

The downtime might also be the symptom of a larger problem, itself associated with data loss if backups are not properly maintained. From hacking attempts to natural disasters, to human error, downtime can be caused by all kinds of events. Applied Tech, a managed IT provider, lists 12 common vulnerabilities to be aware of, each of which can cause downtime and data loss.

The loss of irreplaceable data is one of the most rightly costs of downtime.

Productivity Declines

Most businesses these days heavily rely on software applications to keep their operations smoothly running. 

Email, chat, task management system, and customer support applications are all in the cloud. Losing access to these systems can make a workplace come to a complete stop. 

With both small and large businesses heavily relying on cloud applications, employees could be left with barely anything to do while they wait for the servers to be up and running. When the servers are down and the work is suspended, companies are still bound to pay employee salaries. There are tangible costs involved with paying employees to do nothing.

Furthermore, even if the systems are restored to normal operational levels, productivity is still being harmed in some way.  Having a delay in one location can lead to other delays or problems for others. There could be a backlog of tickets or phone calls. Bringing back services back online can still lead to a backup that requires tons of extra work to be completed.

According to Small Business Trends, companies lose an average of 545 hours of staff productivity every year to IT outages.

Missed Opportunities

Any company that sells a product or generates leads on its website could lose out on customers when their site is offline. If your business is dependent on a high volume of new customers, you are even more susceptible. Users finding your site in search engines will immediately bounce and go to a competitor.

Ecommerce sites are particularly susceptible to the cost of downtime. Gremlin, a provider of software to help engineers reduce downtime, uses publicly available revenue numbers for large ecommerce sites to estimate the costs of an outage. They estimate that the largest ecommerce site in the world, Amazon.com, loses approximately $220,000 per minute of downtime. Walmart comes in second at more than $40,000 per minute in lost revenue.

Enterprises often estimate the total cost of downtime to be much higher than this. According to a survey by Statista, enterprise downtime costs an average of $300k to $400k per hour.  

The cost of downtime to the enterprise
The cost of downtime per hour, according to a survey of enterprises by Statista.

Damaged to Brand

Another worrisome problem that can negatively impact a company during downtime has to with brand awareness and reputation.  While a system outage can cause some serious problems in both opportunity and productivity, downtime can cause irreparable harm to your company’s brand.

If customers are regularly experiencing problems with your application, they are likely to share how bad the experience was with others. Disgruntled customers might use review sites or even word of mouth to spread their displeasure. Some customer displeasure can be avoided with a properly maintained and transparent status page.

Negative comments posted by your existing customers will discourage potential customers away from your brand. What’s more, comments on review sites stick around long after the outage has concluded. This reputation hit is a long term cost of downtime.

Bad reviews and angry customers lead companies to extreme measures to recover their tattered reputation. You’ll waste resources just to regain the trust of customers and potential customers. Your downtime may even have tangible finance costs in the form of refunds or service credits.

The Cost of Downtime

From intangible costs, to incalculable costs, to hard estimates between $40,000 and $200,000 per hour, the cost of downtime varies widely from company to company. But no matter what the costs, companies should be employing all the monitoring and recovery tools available to them to reduce downtime.

StatusGator logo

One such tool is our product, StatusGator which saves you time when discovering the source of an outage. StatusGator monitors the public service status pages of more than 500 cloud services, the kind you depend on every day to keep your infrastructure up and running. When an outage occurs, you can check your StatusGator dashboard first and see immediately if any of your dependencies are experiencing downtime. Instead of wasting hours tracking down the source of the problem, you can know immediately if your provider is already working on the issue.

With StatusGator, you’ll be able to monitor all your providers on single dashboard to catch on issues before it’s too late. Sign up for our free trial and let us know how we can improve StatusGator.

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