The odds of winning the Powerball lottery grand prize are 1 in 175,223,510. You have a better chance of being elected president of the U.S. (1 in 10,000,000) or being attacked by shark (1 in 1,500,000); it’s a toss-up as to which of those two outcomes would be more desirable.
What do you win if your organization experiences the unfavorable odds of an IT outage? Maybe a new job opportunity after you’re fired or bragging rights regaling how may hundreds of thousands of dollars you cost your company by not having an effective disaster recovery (DR) plan in place.
It’s amazing how many organizations – mid-size and smaller ones especially – are willing to roll the dice when it comes to DR. They somehow believe that they are saving more money by not investing in DR than it would cost achieve a rapid recovery following an outage event.
Maybe that’s the issue — labeling. If it were called outage recovery rather than disaster recovery then the laggards would see the error of their ways. After all, outages following a true disaster, which is typically associated with angry acts of nature, are much less likely to occur than downtime caused by a power outage or a slip-up during a software or network upgrade.
It’s hard to rationalize that an organization can save more money than it costs to invest in DR when so many companies – again, mid-size and smaller ones especially — never reopen their doors following extended periods of downtime. Hey, but look at how much they saved when they were in business!
Consider that organizations of every kind are relying more and more on information technology to function because that’s how the world works. As they do, their “digital footprint” increases in size and complexity. As their digital footprint expands, so do exposure risks to downtime and outages, as well as the time it takes to recover systems. When they experience downtime, they cease to function, either in part or entirely, for some period of time.
It really doesn’t matter whose research on downtime costs and consequences you look at or, for that matter, when the research was conducted. The outcomes are always painful and, with time, increase in severity. For example:
- 2010 statistics from a CA Technologies’ survey of 200 companies across North America and Europe found that IT downtime resulted in more than $26.5 billion in lost revenue each year, which translates to roughly $150,000 annually for each business. Further, IT outages were frequent and lengthy, and they caused substantial damage to a company’s reputations, staff morale and customer loyalty. On average, the businesses surveyed said they suffered 14 hours of IT downtime per year. Half of those said IT outages damaged their reputation and 18% described the impact on their reputation as “very damaging.” (1)
- 82 percent of those surveyed in the U.S., Canada and U.K. in a 2014 Avaya survey experienced some type of network downtime caused by IT personnel making errors when configuring changes to the core of the network. In fact, they found that one-fifth of all network downtime in 2013 was caused by core errors. These companies lost an average of $140,003 in revenue; those in the financial sector lost an average of $540,358 per incident. The icing on the cake: 1 in 5 companies fired an IT employee as a result of network downtime. (2)
- In a 2014 blog, Gartner analyst Andrew Lerner wrote that based on industry surveys the number Gartner typically cites is $5,600 per minute from network downtime, which extrapolates to well over $300K per hour. (3)
- A 2015 survey report from U.K. firm Timico said that 37 percent of respondents estimated the cost-per-minute of downtime ranged from USD $15,000 to $30,000. With 80 percent giving their recovery point objectives as two or more hours, potential losses can really stack up. Nearly a quarter of IT managers acknowledged having an outage within the past month but, despite that, over 70 percent admitted to never having worked out the cost of the resulting downtime. (4)
Even these cost estimates should be taken with a grain of salt. Many companies typically take into account only obvious costs incurred during an outage, such as lost revenues or wages of idled workers. But it’s much more complicated than that. One thing often overlooked is the value of your reputation, for example. Some other costs that may need to be considered include:
- Materials lost/disposal and cleanup costs
- Financial impact of customer dissatisfaction
- Contract penalties
- Compliance violations
- Upstream and downstream value-chain ripple effects
- IT and employee recovery costs
- Potential litigation/loss of stock value
- Missed deadlines that result in employee overtime
- Priority shipping charges
For all intents and purposes, it’s impossible to separate a business from its underlying IT infrastructure; they are inextricably intertwined. And, the costs of failure are increasingly surpassing the cost of effective and timely recovery measures, more so with passing time. That you can bet on.
- InformationWeek, “IT Downtime Costs $26.5 Billion In Lost Revenue,” Chandler Harris, 24 May 2011
- Continuity Central, “Downtime costs under the spotlight,” 16 March, 2015
- Gartner, Inc., “The cost of Downtime,” by Andrew Lerner, 16 July 2014
- Continuity Central, “Avaya survey looks at downtime costs,” 7 March, 2014