Modern organizations rely heavily on technology to keep their operations running smoothly. With the rise of e-commerce, online services, software-run operations and the internet of things (IoT), servers have become the backbone of the majority of businesses. When servers go down, it can be extremely costly to an organization—both on their finances and their reputation. But what is the reasoning behind those losses, and how can we calculate the potential risk?
The real cost of server downtime
Until your organization’s servers go down, it can be difficult to comprehend just how serious the impact can be. While statistics can give us a glimpse into the potential impact, it’s important to remember that the true figure is dependent on many factors, especially including the size and nature of your business. Many of the figures below include enterprise-sized companies in the sample, so consider this as a caveat.
Let’s have a look at these average statistics:
- The average cost of downtime is $5,600 per minute, or $300,000 per hour [Gartner]
- In a global survey, 40% of respondents reported that one hour of downtime would cost around US $1 million [ITIC]
- Other studies indicate the range of financial loss to be between $140K-$150K per hour [Avaya]
If these figures seem unreasonable, have a look at these real-life scenarios:
- In 2016, a five-hour outage cost Delta Airlines over 2,000 canceled flights and an estimated $150 million [CNN]
- In 2021, a five-hour network outage cost Facebook an estimated $60 million in advertising revenue. [ARS Technica]
- In 2017, a four-hour outage caused by a typo at Amazon "cost companies in the S&P 500 index $150 million.” [NPR]
While your organization may not be operating on the same scale as Facebook or Amazon, the financial implications of server downtime are just as real. Having a rough idea of what it would cost your organization to experience an outage is a great motivator to be proactive and preventative. Let’s dive into the calculation.
Where financial losses are incurred during outages
- Lost revenue – When servers go down, your business may not be able to process transactions and your customers may not be able to access your services or products. This downtime results in lost revenue and can have a significant impact on your bottom line. The longer the downtime, the more revenue the business stands to lose.
- Reputational damage — When customers can't access your services or products, they may become frustrated, resulting in lost business and a tarnished reputation. Take Delta Airlines for example. With over 2,000 canceled flights, there’s sure to be some upset customers. Reputational damage can have long-term implications and be difficult to recover from, often leading to further lost revenue.
- Increased costs — Server downtime can also cost you money upfront. If the downtime is caused by a cyberattack for example, you may need to invest in new security measures or hire a cybersecurity firm to prevent future attacks. You may need to pay overtime to employees who are working to fix the issue or hire additional staff to help with the recovery process.
- Productivity losses — Productivity loss is the silent killer of server downtime. When employees can't access the tools and data they need to perform their jobs, your organization will see a decrease in productivity and efficiency—ultimately impacting your bottom line. Moreover, IT staff and other employees may need to spend additional time to recover lost data or fix issues caused by the downtime, leading to more productivity losses.
- Legal implications — Server downtime can also have legal implications. If your organization experiences downtime that results in data loss, it may be held liable for damages by customers or regulatory agencies. Some industries even have legal requirements for uptime, and failing to meet these requirements can result in fines or legal action.
If you can manage to estimate the rough costs of each of these line items and add them together, you’ll develop an understanding of just how costly server downtime can be. This is why it is essential for your organization to invest in reliable and secure server infrastructure, regularly test and maintain their systems, and have a comprehensive disaster recovery plan in place should an outage occur. Taking these critical and proactive steps will mitigate risk and ensure your business stays up and running.
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