The True Cost of Downtime: 21 Stats You Need to Know

Updated in May 2024 with the most recent statistics. If you work in IT, you’ve probably dealt with downtime—and all of the challenges that come along with it. While outages happen to all organizations, the cost of downtime can vary depending on a number of factors, one of which is how quickly you can recover. And cloud-native applications introduce some complexity that can affect your recovery time, especially if your data protection isn’t built for the cloud.

The stats below show just how common and devastating downtime can be on your revenue, productivity, reputation, and more. But there’s good news: Downtime doesn’t have to bring you down. Read on to find out how the right solution can boost your application resiliency and dramatically reduce the cost of downtime for your cloud-native apps.

Understanding the Impact of Downtime

A. Ensuring Business Continuity

When it comes to assessing the cost of downtime, having a thought-out business continuity plan is absolutely crucial. This enables companies to minimize disruptions in their systems and ensure operations during unexpected interruptions.

During periods of downtime, businesses can face losses and damages. These can include revenue loss from missed sales opportunities as damage to their reputation. It’s important to identify these losses and comprehend how they contribute to the impact of downtime.

B. Evaluating Technology Infrastructure

Calculating the cost of downtime heavily relies on evaluating technology infrastructure.

Various factors come into play when assessing the impact of downtime such as hardware, software, networks, and IT resources. When any of these components are affected by downtime it can result in disruptions, project delays, and longer recovery times.

Considering the consequences that downtime has on each aspect of technology infrastructure is essential, for estimating its cost.

How Common Is Downtime Really?

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System or application IT downtime happens in every organization, which is why it’s so important to have a recovery plan. And instances of downtime—and their consequences—are going up, research suggests.

For example, according to Uptime Institute’s 2022 Data Center Resiliency Survey, the vast majority (80%) of data center managers and operators experienced at least one outage in the last three years. And Forrester’s Costs of Planned and Unplanned Downtime Report found that 41% were hit with unexpected downtime every week or month.

But not all outages are equal. Severity matters, too.

• • In 2021 alone, 76% of businesses lost data as a result of downtime, Acronis reports.

• • 20% of businesses surveyed by Uptime reported a significant outage in the last three years that damaged their reputation, revenue, and compliance adherence.

But why does downtime happen in the first place? And what are the most common reasons? Let’s take a look.

Get the full infographic: The Cost of Downtime on Your Bottom Line 

The Most Common Causes of Application Downtime

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From ransomware to power supply issues, downtime can happen for a variety of reasons. However, a few causes are more common than others.

Cyberattacks

Cyberattacks are on the rise, posing huge risks to your data and customers.

• • Per a survey entitled “Application Security in a Multi-Cloud World 2023” from Radware, application attacks continue to rise in frequency with 42% of respondents experiencing daily or weekly attacks. APIs are increasingly difficult to protect. 66% of organizations would not be very surprised if their APIs were breached tomorrow.

• • Cyberattacks were among the top three most common causes of downtime, Acronis reports in their Cyber Protection Week Global Report 2022. Over a third (36%) of instances of downtime were due to cyberattacks.

• • Previous data from IDC found that 40% of organizations around the world suffered from ransomware attacks in 2021.

Human Error

Downtime doesn’t happen due to outside forces alone. Oftentimes, it’s because of mistakes made by those closest to your infrastructure. For instance, human error accounted for 40% of significant outages over the last three years, reports Uptime Institute. But what kind of human errors cause outages in the first place?

The same study suggests that outages caused by human error are overwhelmingly due to flaws in procedures—either with staff not following them properly or from inadequate processes themselves.

Networking Issues

Aside from external forces and internal errors, the other most common cause of downtime has to do with your network. In fact, data center managers reported networking problems such as software and system issues as the number one cause of downtime over the last three years.

And Acronis’ study also found that system crashes topped the list of downtime causes, accounting for 52% of instances.

So why are networking issues causing downtime so frequently? Data center managers point to upticks in the use of complex infrastructures like cloud technology and hybrid architectures.

To reduce these issues, it’s critical to have data protection that works specifically for these complex environments. You can read more about the top protection solutions for the cloud here.

With downtime happening so frequently due to these common causes, the next question is: What are the consequences?

How Much Does Downtime Cost a Company?

Uptime Institute’s 2022 Outage Analysis Report found that downtime costs continue to rise. According to ITIC’s 2022 Global Server Hardware Security survey findings one of the drivers is the expensive nature of cybercrime. ITIC’s latest research shows the Hourly Cost of Downtime now exceeds $300,000 for 91% of SME and large enterprises. Overall, 44% of mid-sized and large enterprise survey respondents reported that a single hour of downtime, can potentially cost their businesses over one million ($1 million).

And the more frequently you experience downtime, the higher the cost to your organization. For example, companies with frequent downtime have 16x higher costs than those who don’t, according to LogicMonitor’s IT Outage Impact Study.

The risk of downtime increases depending on your industry, too. High-risk industries include:

• • Banking and Finance

• • Government

• • Healthcare

• • Manufacturing

• • Media and communications

Downtime Costs are Rising

An article from Big Panda, reflects on a study from EMA research which highlights a worrying trend: a 60% increase in the average cost per minute for organizations with less than 10,000 employees, yet the largest organizations remained relatively stable with a reported 5% decrease. Why? The study notes:

• Digital transformation: Increased reliance on IT can lead to more complex systems and potential vulnerabilities.
• Cost-cutting measures: Reducing staff or delaying technology upgrades can hamper outage prevention and response capabilities.

Per a study by Siemens, the costs of unplanned downtime are soaring. In every sector surveyed, an hour’s unplanned downtime now costs the manufacturer at least 50% more than it did two years ago. The study goes on to note that it is estimated that Fortune Global 500 industrial organizations lose almost $1.5tn a year through unplanned downtime. This is a 65% rise in two years, and constitutes 11% of these firms’ turnover.

While some of these numbers are astronomical, the costs vary widely, depending on the size of your organization, how extensive the outage is, how long it lasts, and a number of other factors. The stats above are averages, so it’s a good idea to understand your own outage costs.

Want to know how to calculate the cost of application downtime for your organization? Atlassian recommends this simple formula: Multiply your minutes of downtime by the cost per minute. You can use a lower cost per minute for smaller businesses and a higher one for medium and large. They recommend $427 for small businesses and $9,000 for large ones.

For a more precise estimate, check out this downtime cost calculator.

So where do these downtime costs come from? And what are the other impacts on your business?

Service Level Agreements (SLAs)

Efficiently managing and quantifying the costs associated with downtime is essential, for any business. Service Level Agreements (SLAs) play a role in achieving this objective. By establishing SLAs businesses can set expectations, define levels of downtime, and establish penalties for breaching these agreements.

SLAs emphasize the significance of downtime management by providing guidelines on response times, resolution times, and overall service quality. With defined SLAs in place, businesses can minimize periods of unavailability, enhance efficiency, and improve customer satisfaction.

Determining levels of service disruption is a step in creating SLAs. By understanding how downtime affects operations businesses can identify thresholds for service interruptions. These thresholds may vary depending on the criticality of systems and services and their potential impact on productivity and revenue.

Breaching SLAs can have consequences for both service providers and customers. To ensure accountability SLAs outline penalties and remedies in the event of agreement violations. These penalties may include compensation, service credits, or expedited efforts to resolve issues promptly. By stating these outcomes from the beginning SLAs encourage service providers to prioritize uptime and timely issue resolution.

Therefore SLAs provide a framework for managing and mitigating the costs associated with downtime.

Businesses can use them to set expectations, track performance, and effectively handle incidents of downtime. By giving importance to operation and implementing Service Level Agreements (SLAs) companies can minimize the financial and reputational risks linked with periods of unavailability.

The Impact of Downtime on Your Business

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Downtime affects your organization in a number of ways, all of which add up to the overall cost. Some of the biggest impacts are on your productivity, revenue, reputation, and data.

IDC’s Worldwide State of Data Protection & DR Survey dives deep into each of these aspects. Here are some of their findings.

 

• • Nearly half of all data disruptions caused lost productivity.

• • Over 30% of outages resulted in a direct revenue loss.

• • About 40% of disruptions led to some sort of brand reputation damage.

• • 43% of organizations experienced data loss as a result of outages.

In addition to these impacts, they also pointed out that nearly 50% of data outages caused employees to work overtime, another impact on your bottom line.

So what can you do about it?

Financial Impact

When it comes to downtime the financial consequences can be significant. Let’s delve deeper into the outcomes that organizations might face.

Exploring the effects of downtime

One of the most apparent financial impacts of downtime is the loss of revenue. When systems are not functioning businesses cannot generate sales. End up losing money. This can be particularly detrimental, for e-commerce companies that heavily rely on their presence to generate income.

Furthermore, apart from revenue loss, downtime can also lead to increased expenses. When systems go down organizations may have to invest in emergency maintenance or repairs, hire staff to resolve the issue, or even seek services to get operations back on track. All these unforeseen expenses can come quickly. Strain the budget.

Another potential financial consequence of downtime is the risk of facing penalties. Depending on their industry organizations may have compliance requirements. If downtime results in a breach of these regulations substantial fines and penalties can be imposed, further adding to the burden.

Moreover, legal liabilities can also become a concern when downtime occurs.

If customers or clients suffer losses or damages due to downtime organizations could be held accountable. Face potential lawsuits. The costs associated with battles and settlements can significantly impact the organization’s position in the long term.

Additionally, it’s crucial to consider how downtime affects insurance coverage. Some insurance policies may have clauses or exclusions related to downtime or data breaches. If an organization fails to meet the insurer’s requirements due to downtime they may lose coverage. Experience premiums create another financial concern.

In summary, the financial consequences of downtime encompass a range of outcomes including revenue loss, increased expenses, regulatory penalties, legal liabilities, and challenges, with insurance coverage. It is essential for organizations to evaluate and address these risks effectively in order to minimize the impact of any downtime.

Impact on Productivity

When downtime happens it can significantly affect productivity within a company. To understand the impact we need to examine how downtime directly affects aspects of the business.

Analyzing the effects of downtime on productivity

Downtime leads to a decline in employee productivity. When systems are not working employees cannot efficiently carry out their tasks causing delays and disruptions in workflow. This ultimately affects project timelines and overall productivity levels in the organization.

Moreover, downtime also has an impact on customer satisfaction. If customers cannot access a company’s products or services due to system unavailability they might get frustrated and seek alternatives from competitors. This could result in lost business opportunities and potential revenue loss for the organization.

By studying factors like employee workability, customer satisfaction, and revenue generation during system unavailability we can better understand the cost of downtime on productivity. By considering these factors organizations can develop strategies to minimize downtime and reduce its impact on productivity.

• Employee workability
• Customer satisfaction
• Revenue generation, during system unavailability

Operational Efficiency: Enhancing Productivity and Reducing Costs of Downtime

When it comes to the expenses incurred during periods of downtime operational efficiency plays a role. Each minute of downtime translates into losses for businesses impacting their overall productivity and bottom line. By understanding the relationship between downtime costs and operational efficiency companies can take measures to minimize disruptions and optimize their potential.

The consequences of downtime such as disrupted processes, delayed production, and missed opportunities directly influence efficiency. When systems go offline or encounter issues employees are unable to perform their tasks. This leads to wasted time and resources resulting in productivity and lower overall efficiency.

It is crucial to quantify these losses in order to highlight the impact of downtime on efficiency. Every minute counts from the moment a disruption occurs. The longer it takes to resolve the issue and restore system functionality the greater the financial loss incurred. By assessing these losses businesses gain insights into the tangible costs associated with downtime. This enables them to make decisions and prioritize investments in system reliability and redundancy.

Additionally, downtime also results in missed opportunities. Whether it’s a sales call that was not answered or completed successfully due to system unavailability or a delayed response, to a customer inquiry caused by issues – all these instances directly impact customer satisfaction and loyalty.

These missed chances can have long-term effects as customers might decide to take their business resulting in a loss of income and a tarnished reputation.

It is vital for businesses to fully grasp the consequences of downtime. Not only does resolving the downtime itself come with a cost but there are also indirect expenses, like overtime payments for IT staff potential penalties, for failing to meet service level agreements, and the cost of missed business opportunities. By quantifying these implications companies can make choices and allocate resources wisely to prevent and minimize downtime.

How to Reduce the Cost of Downtime

While you can’t completely eliminate downtime, you can reduce its severity. Part of that involves testing your recovery plans and processes regularly, something that only 31% of organizations do more than once a year, reports Forrester. Doing so can make a huge difference when an unexpected outage occurs.

Something else that can help? Choosing and investing in the right solutions to back up and recover your data. In fact, this is one of IBM’s key findings in their downtime costs report, and you can reap huge rewards as a result.

The report states:

“IT leaders must consider technologies that decrease business disruption and increase availability levels. Such investments will result in greater business productivity and higher revenue.”

Look for a platform that can help you set disaster recovery plans so backups happen automatically and according to your needs. And make sure you invest in an option that’s built for the technology you’re using—legacy solutions aren’t cut out for the cloud, after all.

If you’re in the market for cloud-native data protection, may we suggest Trilio? Learn more about how we can help you bounce back from downtime fast by requesting a demo or exploring Trilio for Kubernetes.

Customer Experience and Satisfaction

When a company encounters periods of service disruption it not only affects its operations but also has a significant impact on the experience and satisfaction of its customers. Customers expect businesses to be available and accessible at all times so any interruption in service can lead to frustration and dissatisfaction.

During a downtime event, customers may face difficulties accessing the company’s website or utilizing its services. This can result in missed sales opportunities. Create experiences for customers. In some cases, extended periods of downtime may prompt customers to seek alternatives resulting in customer attrition.

Apart from customer attrition, downtime can also result in reviews that harm a company’s reputation. In today’s era, dissatisfied customers have the ability to share their experiences widely through online platforms and social media channels. Negative feedback regarding a company’s downtime can rapidly spread, further tarnishing its reputation and dissuading customers. Utilizing a well-crafted social media post template can help businesses respond promptly and consistently to such feedback, mitigating potential damage to their reputation.

Furthermore, the financial repercussions of downtime extend beyond lost revenue. Companies may need to allocate resources toward managing customer complaints, resolving issues arising from the downtime incident, and rebuilding customer trust. These supplementary costs can further impact the company’s profitability.

To minimize the impact of downtime, on customer experience and satisfaction levels, businesses should prioritize measures aimed at preventing disruptions.

To ensure operations it is crucial for companies to invest in infrastructure, take proactive steps to implement redundancy measures, and diligently monitor their systems for any potential issues that may arise.

In addition, it is important for businesses to establish effective communication channels. This will allow them to promptly inform customers about any instances of downtime and provide updates on the progress being made to resolve the issue. Transparent and timely communication plays a role in managing customer expectations and minimizing dissatisfaction.

Risks and Management

When it comes to the implications of system failures or downtime businesses must carefully. Effectively manage various risks. By understanding these risks and implementing management strategies companies can minimize the effects on their operations and overall reputation.

A. Assessing Risks

An essential aspect of managing the impact of downtime is conducting a risk assessment. This involves evaluating the consequences associated with system failures or downtime.

• Evaluating risks concerning system failures or downtime: This involves a detailed analysis of the potential risks and issues that can arise when a system experiences failures or downtime. It may include identifying the causes of such failures, their likelihood, and the impact they can have on business operations and reputation.
• Identifying operational and reputational risks: Operational risks refer to the potential disruptions and challenges a business may face due to system failures or downtime. This can include things like lost productivity, inability to serve customers or supply chain interruptions. Reputational risks pertain to the damage that can be caused to a company’s image and brand as a result of downtime. Negative publicity, loss of customer trust, and damage to the company’s reputation are all elements of this category.

B. Planning for Disaster Recovery

Having a defined disaster recovery plan is crucial in estimating the cost of downtime. By having procedures in place businesses can respond effectively to system failures or downtime reducing their impact on operations.

• Recognizing the importance of disaster recovery planning when estimating downtime costs: This highlights the significance of having a well-defined disaster recovery plan in place. It’s crucial for estimating the costs associated with downtime. When you have a disaster recovery plan, you are better prepared to respond to system failures or downtime effectively. This readiness can ultimately help in minimizing the financial losses and other negative consequences that may arise during such events.
• Implementing processes, technologies, and procedures to recover systems and data: After recognizing the importance of disaster recovery planning, the next step is to put these plans into action. This involves establishing specific processes, utilizing appropriate technologies, and defining procedures to ensure the recovery of systems and data in case of downtime. This can include backup systems, redundancy, failover mechanisms, and other technical and operational measures to minimize downtime’s impact.

Data Loss and Recovery

When businesses experience periods of downtime one of the concerns they have is the loss or corruption of their valuable data. System disruptions can make data inaccessible or even completely wipe it out which poses challenges for organizations.

Recovering and restoring data after downtime can be quite expensive for businesses. The costs involved in retrieving lost or corrupted data can quickly accumulate, especially if specialized services or tools are required. Besides the implications, there is also an amount of time and effort needed to restore the data, which can further hinder productivity and operational efficiency.

Moreover, the impact of data loss or corruption goes beyond the period of downtime. Businesses may encounter long-term consequences as they strive to regain access to information, piece fragmented data sets, or recreate lost files. This process tends to be time-consuming. Has the potential to significantly disrupt business operations.

To mitigate the risks associated with data loss and recovery it is crucial for businesses to implement backup and disaster recovery solutions. Regularly backing up data. Implementing procedures for restoring it can help minimize the impact of downtime while ensuring that critical information is not permanently lost.

Don’t Let Downtime Damper Your Resiliency

The effects of downtime on your business can be devastating, so don’t leave your ability to recover quickly to chance. Instead, invest in the right platforms, processes, and people to build resilient applications that hit SLAs and continue to operate in the face of failure.

We agree with the 2024 Forbes article entitled “The True Cost Of Downtime (And How To Avoid It)”. It states:

As organizations begin thinking about maximizing uptime, they should consider investing in several different technologies to keep systems operational, including:

• Cloud technologies that offer scalability, redundancy and high availability features designed to minimize downtime and improve operational resilience.
• Cybersecurity tools to help prevent, detect and respond to cyber threats.
• Collaboration software to stay connected in real time and facilitate rapid communication.
• Data center replication ensuring redundancy and business continuity.
• In-service upgrades to stay up while new functionality is integrated.
• Monitoring tools, including network monitoring, server monitoring, application performance monitoring and log management solutions.
• Backup and disaster recovery solutions to copy critical data and applications and enable rapid recovery.

Want to learn more about bouncing back from disaster? Check out this free eBook: The Key Benchmarks for Realizing Application Resiliency

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In summary

Businesses must have an understanding of the impact and effective management of downtime as it is a factor. Throughout this content, we have explored aspects of downtime including its effects on revenue, productivity, data loss, operational efficiency, customer experience, and financial implications.

By comprehending the risks and implementing management strategies businesses can minimize the consequences of downtime on their operations. Timely resolution and minimizing downtime are ensured through Service Level Agreements (SLAs) which play a role.

Downtime has resulted in lost sales and dissatisfied customers for companies across industries. Real-life case studies provide evidence of the importance of addressing downtime issues.

To minimize losses associated with downtime businesses need to prioritize efficiency and invest in data recovery solutions. By doing so they can protect their reputation. Ensure customer satisfaction.

In conclusion, the cost of downtime extends beyond implications; it impacts aspects of a business ranging from revenue to customer experience. Therefore understanding and effectively managing downtime costs are paramount, for any company striving to succeed in today’s market.