It has almost become a phobia in the IT department – network downtime or outage. Regardless of how much ever IT strives to keep the network up and running, there are many reasons due to which unscheduled network downtime keeps happening from time to time. So, what could network admins do to keep this menace under control? You might as well know the answer to this one: proactively monitor the network availability and performance problems. But for those of you that do not think network monitoring could help you reduce network outages, this blog will help put the impact of downtime into perspective so that you understand the larger picture of what all losses you may potentially face if you are not properly paying heed to the performance of your network infrastructure.
As much as you would wish to keep your network up 24/7, 365 days of the year, it is only theoretically possible as there are bound to be network outages some time, somewhere for some reason. It turns out, 99% availability, as good as it sounds, means 3.65 days of downtime per year, or 7.2 hours a month, or 1.68 hours a week. It doesn’t seem so good now, does it?
Look at this chart (source: Wikipedia) to understand how much of availability your network meets and how much you think is enough. And 99% is just not!
The Cost of Downtime
Consider five key factors to calculate the cost of downtime on your business.
#1 Productivity Lost
This is calculated in value worth of employee expenditure lost due to non-productivity.
- Direct productivity – This amounts to the direct expenditure loss per person due to non-productivity during the outage period times the number of workers impacted
Direct productivity ($$$) = Number of people * Number of hours of lost productivity * Estimated productivity loss/person/hour
- Indirect productivity – There may be some teams and resources dependent on the directly affected lot, and their productivity will go down as a result of the former case. For, e.g., a 5 member team is not able complete their job in time, or are over-burdened with the work of the directly impacted team.
Indirect Productivity ($$$) = Number of people * Number of hours of work * Percentage of lost productivity * Estimated productivity loss/person/hour
Count in the employees working in shift if you are running a 24/7 production business. If it’s a 24-hour outage and you run 3 employee shifts of 8 hours per day, then there will be 3 times the loss of productivity
#2 Profit Loss
This is the actual profit your business would have made during the outage period, if the network and systems had been up and running. If you are running a website or e-commerce business, every hour of website downtime means loss in profits. This can be categorized as lost sales or deferred sales. Both can happen during service downtime.
This is calculated as follows:
Profit Loss due to Lost Sales ($$$) = Number of sales deals lost/hour * Average value of the sales deal * Number of hours of downtime
If it is a deferred sale, then it impacts your cash flow and in-quarter profitability and the loss of interest number the deferred amount by the number of days deferred.
#3 Cost of Penalty
If you are a service-based business, then your hours of downtime may impose a financial penalty for the non-productive hours. And if there’s going to be a compliance mandate tied to critical system availability dependent on the network, then factor in the penalty for non-compliance.
#4 Cost of Repair
This totally depends on your business continuity plans and disaster recovery strategy. If you have implemented the infrastructure for backup network lines, failover routers, etc., you should factor in the cost of procurement and usage during the outage period. If there is no recovery strategy, then you will incur the cost of repair from third-party including technical personnel expenditure, cost of hardware repair and replacement if required.
#5 Cost of Reputation & Loyalty
Though this may not be an immediate impact, your prospective customers may tend to lose trust in your organization and brand and may switchover to other competitors. This creates a huge reputational impact on your company and you have to invest money into rebuilding your brand, reinstating trust, and winning back your loyal customers.
Face the Facts
- Downtime Cost Per Year: Companies experience an average of 501 hours of network downtime every year, and the overall downtime costs an average of 3.6% of annual revenue [Source: The Costs of Enterprise Downtime, Infonetics Research]
- Downtime Per Week: According to Dunn & Bradstreet, 59% of Fortune 500 companies experience a minimum of 1.6 hours of downtime per week. Assuming that an average Fortune 500 company has 10,000 employees who are paid an average of $56 per hour, including benefits ($40 per hour salary + $16 per hour in benefits). Just the labor component of downtime costs for such a company would be $896,000 weekly, which translates into more than $46 million per year.
- Downtime Per Hour: Gartner estimated the hourly cost of network downtime for large corporations was $42,000, with a typical business experiencing an average of 87 hours of downtime a year, resulting in total losses exceeding $3.6 million.
- Downtime Cost Per Minute: According to a Ponemon Institute study, the average cost of data center downtime across industries is approximately $7,900 per minute
Proactive Network Monitoring
Overall, the cost of network downtime is certainly colossal and can be avoided if network teams follow the adage ‘prevention is better than cure.’ Continuous and proactive network monitoring can help you easily detect performance problems leading to network outages. When you have identified network issues at early stages, you can take informed decisions and fix them before they build up into the detrimental downtime.