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Blog
May 2, 2023

The cost of downtime: How to recover from disasters faster

No matter how advanced technology becomes, there’s one thing that it can’t guarantee: Constant stability. Unfortunately, IT doesn’t come without its unexpected surprises, so it’s up to you to implement a robust disaster recovery strategy that reduces downtime as much as possible when an outage takes place.

System downtime is detrimental to all businesses — even some of the largest companies in the world can’t escape the significant impacts. In 2021, one of the largest technology companies, Meta Platforms, Inc., faced a six-hour outage that cost them roughly $79 million in ad revenue loss.

That’s why it's essential to prepare for the inevitable. In this article, we’ll cover what causes an outage, the factors that affect downtime costs, and how to calculate and minimize these losses.

The outcomes of an outage

  1. Disrupted productivity 

Companies rely on their servers and/or cloud systems for business to run smoothly. They’re the source that allows standard operations to perform and colleagues to communicate. Outages heavily disrupt these processes and sometimes bring them to a screeching halt. This leads to systems going offline — leaving employees unable to fulfill their duties and later contributing to indirect costs. 

  1. Tarnished reputation

One of the biggest pain points that businesses face following an outage are the negative effects it has on once-loyal customers — especially for financial institutions. The inability to provide services during an outage can make your brand appear inadequate to many consumers, and when sensitive customer data and finances are involved, it can have an even worse impact on your reputation.

  1. Weakened revenue 

Every business has sales targets to meet, but in the event of an outage, you become vulnerable to major losses that leave a dent in your annual revenue. If your sales channel goes out of commission, customers become unable to purchase from your stores. The longer your services are down, the amount of money typically generated per hour quickly builds and slips away.

The longer your outage lasts, the higher the impact these factors have on your business, and there’s data to back this up. In a Forrester study, a number of IT leaders were asked: Which of the following costs does your organization face due to planned and unplanned downtime? 

  • 53% of respondents said lost revenue. 
  • 47% stated lost productivity. 
  • 41% put lost brand equity or trust.

Outage costs are increasing

According to Uptime Institute’s 2023 Annual Outage Analysis, the number of single major outages that cost companies over $100,000 is increasing. The report found that this is due to a variety of factors, including inflation, fines, SLA breaches and the cost of labor, but the biggest reason is the growing dependency of corporate economic activity on the data center. 

As mentioned earlier, you can’t rely upon technology for constant stability. Outages are completely unavoidable, no matter how advanced or robust your systems may be. However, while they may be inevitable, you can put measures in place to prevent them.

What causes outages?

The best way to decrease the likelihood of an outage is by understanding what triggers them. The most common reasons that cause an outage to take place include: 

  • Human error.
  • Management failures.
  • Cyberattacks.
  • Power outages.
  • Internet outages.

Uptime Institute’s 2023 Annual Outage Analysis found human error to be the most consistent cause, playing a role in two-thirds to four-fifths of all outages — based on 25 years of data. Management failures come second in their contribution to a considerable amount of outages. The report also found that 78% of operators said by implementing better management and processes, operators could've avoided their most recent and impactful outage. 

These findings underscore the importance of implementing strong training methods as well as a thought-out, rehearsed recovery strategy to get you back on your feet. These simple elements are critical to reducing downtime costs.

Factors that affect downtime costs

Organization size

There’s a notable difference in downtime costs between small businesses and large organizations. According to SolarWinds, the cost of downtime for smaller businesses averages around $137 to $427 per minute. However, for larger businesses, this can cost over $16,000 per minute. That equates to $1 million for a single hour of a short-lasting shortage.

Time of outage

How long your outage lasts is one way time can affect downtime costs, but the time of day — or even year — can also have a significant effect on your true cost. For example, an outage from 1 a.m. to 3 a.m, is less likely to impact you than one from 1 p.m. to 3 p.m. The same goes for the holiday season when compared to less active months.

Industry 

The industry of your business plays a key role in how detrimental your downtime outcomes are. Companies that focus within a specialized or niche market, such as finance, health care, media, government and more, are at higher risk of impact. Industries like retail, education and construction will still feel the blow, but not as harshly as others.

Business model

Businesses that entirely rely on online platforms, such as e-commerce businesses, are naturally at higher risk of server downtime than companies with physical stores. In an outage, online stores rarely have a system to fall back on. However, physical stores have procedures in place to ensure business continuity, even when systems are down.  

Although outages may affect some industries more than others, all companies can suffer significant losses caused by downtime. It’s important to understand the elements that contribute toward downtime and how to estimate your total costs.

How to calculate downtime costs

There are many tools available online to help work out your cost of downtime. But if you’re wanting to do the math yourself, there are some simple formulas to calculate the amount.

  1. Revenue downtime cost = Minutes of downtime x Cost per minute
  1. Employee downtime cost = Number of affected employees x Productivity percentage x Average hourly salary
  1. Downtime cost per hour = Total revenue loss + Loss in productivity + Recovery costs + Approximate intangible costs 

Unfortunately, there’s no limit to downtime costs, and as you can see from these equations, there’s more to downtime than an outage. There’s a hit to productivity, data loss, brand reputation, recovery costs and employee turnover. So, what can your company do to enhance operational resilience and minimize the impact of disaster? 

How to minimize the costs and impacts of a disaster

  1. Perfect your disaster recovery (DR) plan

To prepare for drastic circumstances ahead of time, it’s beneficial to form a disaster recovery plan to help your business get back up and running as soon as possible. For this, you may require the assistance of IT recovery experts. By formalizing a recovery team, they can help you form a robust strategy that promotes business continuity in the event of a crisis. 

  1. Nail your prevention tactics

There’s no single answer that stops you from being subject to disruption. But, if you take time to thoroughly assess the potential risks, you can form the relevant processes, routines and solutions to prevent the likelihood of an outage. This may include replacing older systems and security features.  

  1. Predictive maintenance

Although this is a form of planned downtime, to minimize the cost of unexpected incidents, you may require semi-regular machine maintenance to fix potential faults in your hardware. This may mean you spend some money at the time, but the upkeep of your physical resources will help to reduce the likelihood of a sudden outage that could end up costing you much more.

  1. Keep practicing your recovery

In the event of an outage, your recovery team should know the DR strategy like the back of their hand. Make sure you have a communication structure that allows your IT teams to remain updated and informed when practicing the recovery process. This ensures they’re as efficient as possible to prevent large downtime costs due to unnecessary delays. 

Recover quickly with Cutover’s Solution

Every second your operations down contributes toward wasted business. Luckily, Cutover’s Collaborative Automation SaaS platform provides the perfect solution to prepare for outage scenarios as it promotes operational excellence in your business. Our platform:

  • Connects teams, applications and technology for heightened communication and efficiency.
  • Automates  manual processes, planning and execution associated with disaster recovery.
  • Enables you to rehearse DR events with precision, so your team knows exactly what to do when an unexpected outage occurs. 

Want to find out more about how Cutover’s automation solution can improve your applications and processes? Feel free to contact us or try out our platform and book a demo with us today!

Chloe Lovatt
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