It is reported that downtime costs global enterprises around $351,000 (£300,000) per hour. That’s a whopping $5,850 (£5,000) per minute! It’s especially true for big businesses and manufacturers, as the calculation includes the loss of revenue, among other factors.
Downtime is when a businesses infrastructure is compromised either by a person or by an outage of power, internet, network, among other reasons. These database, hardware and software incidents can last either a few moments, days or even weeks. This leaves both the business and its customers in the dark, causing a massive loss in profits.
But how much does it cost your business? This article will walk you through calculating the costs and what other effects downtime will have on your business.
Ruins Productivity
If your business is predominantly e-commerce, the loss of productivity when downtime occurs could be monumental. Part of figuring out how much downtime costs you is calculating how many employees would be unable to work and figuring out their salaries.
Infrastructural issues and internet shortages can cause this lack of productivity. So, with an average of $5,850 per minute, a few hours could cost an eye-watering amount.
Affects Your Reputation With Customers
The word spreads when the press becomes aware of a major downtime incident that affects plenty of customers.
One of many examples is a cyberattack on Sony causing them to take the PlayStation Network offline in 2011. One of the world’s leading data breaches involved hackers attempting to gain access to the data of 77 million users. This forced Sony to shut down for 28 days, leaving gamers who were awaiting much-anticipated game releases, furious.
Not only did this cause widespread shaken trust in the company, but it cost the company an estimated $250 million in revenue.
Depletes Revenue
It’s no surprise then that downtime does have a direct correlation with revenue. Alongside customers becoming unable to purchase products, there are hidden costs to downtime too. Here are all the different ways it affects a businesses revenue:-
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- Customers are unable to buy products or services
- The cost of employees salaries whilst they are unproductive during downtime is wasted
- Cost of fixing the problem that caused downtime
- The price of customer distrust, especially if as a result they don’t return
- Intangible costs – some include a lack of customer service capability, increase in employee stress, or result in a broken machine that reduces manufacturing and production
5 Causes of Downtime
Several factors can cause downtime, and knowing the most common causes can be beneficial to preventing downtime in your business. The five most common causes of business downtime are the following.
- Human Error. Everyone makes mistakes; sometimes, a simple slip of the hand can be detrimental to your business if the right infrastructures are not in place. Human error can also mean that the incorrect parts have been ordered for a particular operation to take place. This may result in business downtime.
- Network Outages. Sometimes, downtime is completely out of human control. A network outage can cause a company to lose access to the internet, meaning that access to their networks can be limited, causing organisational downtime.
- Power Outage. A loss of power will almost certainly cause downtime for most businesses today. Without power, networks will shut down, and some devices that do not have backup power supplies and Wi-Fi networks.
- Cyberattacks. Cyber attacks are also a common cause of business downtime. If a cyber attack affects a business’s IT infrastructure, it will cause downtime to mitigate further damage being caused.
- Internet Outages. Sometimes, a web service or internet provider has issues that can cause downtime for your business or at least your organisation’s network.
How To Calculate Your Cost Of Downtime?
There are many online calculators you can find online. But if you want a quick look at calculating it for yourself, follow the steps below:-
- First you need to calculate the number of employees affected by downtime
- Then calculate the percentage of productivity out of 100%
- Lastly tally up the average hourly salary for employees and then try the equations below, the first being a quick tally, and the second is for more details:
Cost of downtime = (Number of Affected Employees) X (Productivity %) X (Average hourly salary)
Downtime Cost p/h = Total Revenue Loss + Loss in Productivity + Recovery Cost + Intangible Cost Estimation
How To Reduce Your Business Downtime
Reducing downtime is fundamental for any size business, as the more your business grows, the more money you will save. The best way to reduce the costs of downtime is to consider what is causing your business the most downtime. Here are some examples:
- Machine Maintenance – Whether you’re a manufacturing business that relies on heavy machinery for production or IT software and hardware maintenance. Regular maintenance may cost money at the time but could save you a fortune.
- Effective Data Backups – Reduce the need for recovery time when you have a data backup plan in place before the downtime.
- DR Strategy – A disaster recovery strategy ensures you always have access to data, applications, etc.
- Staff Training – Training staff to avoid human errors that lead to downtime is also a cost-effective method in the long run.
Summary
Calculating the costs and putting together action plans are relatively quick and can help minimise the risk to your business.
A good resolution strategy benefits your revenue, and boost customer loyalty to your brand. Which is valuable if your business is looking for long term success. So, calculate the cost of downtime, what will be the likely cause of it, and get some plans in place.
About EC-MSP, your IT support partner
EC-MSP are one of the most trusted IT support providers in London. If you would like more advice and support with technology for your business, contact us today to see how we can help.
