Why Should You Care About the cost of Network Downtime?

The most crucial aspect of almost every network is availability, scalability, network performance, agility, etc.

everything requires the network to actually be up and running. Gartner estimates $5,600 per minute as the cost of network downtime, which extrapolates to well over $300K per hour.

However, this cost will vary on size of the business and industry, length and timing of the outage, employees affected, etc.

For an example, losses are considerably higher per hour for businesses which are based on high-level information transactions, like banks and on-line retail sales.

Beyond the financial outcomes, network downtime can sit on your organization’s productivity & efficiency levels.

Every time users experience interruptions, they usually take an average of 23 minutes to refocus on their priority tasks

The impact

In the modern world, where almost every business is online which depends on a set of software, downtime and network performance directly affects the business metrics that we all care about.

In simple words, in case if your business website is down, you are losing money. Actual money.

Even a single network outage can cost a business millions of dollars.

For example, last May, a technology failure stranded thousands of British Airways passengers. Later their CEO explained that this network failure had costed the business $102.19 million.

This monetary estimate excludes the negative impact on the brand’s reputation.

It also doesn’t include the engineering costs involved to proactively find out the root cause of this issue with manual network monitoring.

Ideally the network availability & other metrics should be monitored closely.

Quite often CTOs & CIOs overlook network downtime as something that shouldn’t exist (i.e. not practical) or as something that’s is unavoidable (i.e. not true).

As a matter of fact, the more an organization pays attention to IT Ops & Net Ops, the more they save on engineering efforts in the long run.

The saved efforts can be placed into adding new features and paying attention to customer requests.

By moving the IT ops burden to a tool, you can potentially save efforts, time, and resources spent on digging into the metrics to create post-mortems or a list of action items after a critical event.

Always take a proactive approach rather than a reactive one to avoid network downtime and build resilience.

To summarize it, similar to taking a flu shot, you should thoughtfully inject failure-proof measures into your systems to mitigate major issues down the line.

If you prefer to wait until it’s too late, then you’ve already impacted end-user experience while they’re using your service.

This wouldn’t affect your bottom line immediately, but it can affect customer’s trust on your brand in the long run.

How to calculate your cost of downtime

The fact is, every organization wishes to reduce its IT costs.

Besides, what if ignoring technology upgrades to reduce your IT expenses was in-fact increasing them?

Power outages and failures are not the sole culprits when it comes to network downtime, it can be because of outdated hardware, human error, lack of network monitoring etc.

So how do you figure out where you actually stand in case of network downtime costs?

Here’s a straightforward way to calculate this cost and eventually make out how your organization could be impacted:

Network Downtime Formula

Cost of Downtime (per hour) = Lost Revenue + Lost Productivity + Recovery Costs + Intangible Costs
Lost Revenue

The very first step would be to calculate the amount of revenue your business has generated/hour.

In other words, it will be equivalent to revenue per week/40 hours.

A significant component to find out your business’s lost revenue is your dependency on network uptime.

Uptime can be calculated in terms of time or overall percentage your site or service has been up and running.

For an example, in case you are running an e-commerce business and you only sell your stuff online, you are completely dependent on the internet for your company’s revenue.

Hence you should get an estimate or the percentage amount of your business revenue that is actually dependent on uptime.

Lost Revenue = Revenue/hr x Downtime(hrs) x Uptime (%)

For an example: If a company’s revenue is $3,000 per hour & my network was down for 2 hours & my network uptime percent is 30 so my lost revenue will be $1,800 per hour.

Lost Productivity

Due to IT outage, employees are unable to perform their jobs.

However, their salaries are a hard and fast value and don’t change even throughout network downtime.

To calculate the productivity lost, you need to 1st calculate every employee’s salary per hour.

Then, eventually estimate the % of productivity that’s hooked in to uptime and this might vary across staff.

(Uptime, remember, is solely the time or percentage your website is up and operational.)

This percentage you get in the end is your Utilization percentage.

Lost Productivity = Employee Salary/hr x Utilization % x Number of employees (with same Utilization %)

Recovery Costs

It is also referred to as costs accumulated while fixing the problem. It embodies, but is not restricted to:

• Replacement components
• Repair services
• Lost data recovery
• Other prices because of lost data

These might not be as tangible at revenue and productivity prices, however they’re equally as necessary when deducing your actual network downtime costs.

Intangible Costs

It is the type of cost that might affect your business from a long-term perspective.

These costs take place whenever there is network downtime which eventually damages the reputation of your brand.

This will eventually affect the business that have heavy dependency on network performance or network availability.

The formula also accounts for unmeasurable costs to determine the total network downtime cost, providing a better understanding of the consequences.

The Final Cost

Once you’ve calculated individual costs separately, you may now put them together in the main formula & tally your total network downtime cost.

Possible Reasons for Network Downtime

Experts consider human error to be the leading cause of downtime.

Dimension Data’s Network Barometer report published in 2014 cites the downtime percentage due by human error is 32%.

While Avaya research states that 82% of businesses experience downtime due to human/ manual error.

Another possible reason for network downtime could be due to hardware equipment failure, or due to cooling/ temperature failure.

One of the major expenses of operating a datacenter is air conditioning technology or even a liquid coolant to keep the temperature of datacenter under control.

If your critical server is in a closed space and the AC stops working or the fan dies, there’s a high possibility that your server will overheat, causing the network to go down.

One way to minimize your risk of downtime is to use a network monitoring tool rather than relying on the hands-on expertise of one or two individuals in your IT dept.