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Cost-Unconscious: Denying the True Cost of Network Downtime

Guest articles > Cost-Unconscious: Denying the True Cost of Network Downtime

by: Tim Hebert

Today, business leaders are extremely cost-conscious and strive to pare every ounce of fat from their budgets. But are they really looking at the cost of not doing information technology right?

Information technology has evolved from a set of tools that a business uses to be more efficient, to a system in which information technology and business are so intertwined that they cannot be separated. The flow of accurate and timely information is the lifeblood of the business, and when it’s disrupted, business screams to a dead halt. That gets expensive fast. Lost revenues can easily run up into the six or seven figures. And that’s just the start.

However, most executives become “cost-unconscious” when thinking about network downtime. They don’t consider downtime costs until an outage occurs. Then, faced with loss of revenue and productivity and damage to their reputation, downtime becomes a painful concern.

But as soon as the network is back up, corporate amnesia sets in. Executives do nothing to eliminate future problems.

Ironically, the cost to minimize the impact of future downtime is usually far outweighed by a single outage. For example, more than 60 percent of planned downtime can be attributed to system backups, but little time is spent verifying the integrity of these backups. It’s estimated that 25 percent to 50 percent of backups are unreliable. It would be easy to justify a few hours per week verifying the integrity of backups

Downtime falls into two primary categories: planned and unplanned. Our experience shows that planned downtime accounts for approximately 80 percent of all downtime. Often, planned downtime cannot be avoided as more businesses operate 24/7. Since planned downtime can be scheduled for low-use times and users can be alerted, it’s not the main problem.

Unplanned downtime is what keeps IT professionals, executives and business owners awake at night. Natural disasters and utility failures only account for 3 percent of all outages. Hardware failures account for less than 10 percent of all network failures. Systems errors account for less than 8 percent of failures; application errors, 19%.

Industry experts estimate that almost 60 percent of network failures are caused by human error. This problem can be attacked through better training for IT organizations and end-users, better network documentation, better change-management controls and processes, and better network monitoring and management

Most organizations don’t fully understand the impact planned and unplanned downtime has on their business. Calculating the cost of this impact is complicated since it requires an understanding of both tangible and intangible costs.

Tangible costs are quantifiable hard costs associated with the outage. Some primary tangible costs are labor costs for idle workers, lost revenue, the cost to recover lost information, recovery cost to resume business and lost or spoiled inventories.

Actual dollars and percentages vary drastically from industry to industry. But here are some low-end statistics. The average US labor cost (fully loaded) is $23 per hour; for professional organizations it’s $42 per hour. In Rhode Island, the average labor cost for a high-tech company is $65 per hour. One hour of unplanned downtime for a technology firm with 110 employees, assuming that the outage affected all employees, thus would cost around $7,150. If it lasts four hours, it would cost $28,600 in labor alone. But that’s just the start.

Intangible costs can impact the business more severely than some hard costs. Many companies choose to ignore intangible costs in their downtime calculations because they can be difficult to estimate, others underestimate them altogether.

Soft costs vary among organizations. The four primary intangible costs are lost opportunity, customer loyalty, damaged reputation, and employee morale. What is the cost of losing one of your largest clients? What is the cost of replacing some of your best employees? It’s hard to state in dollars, but these soft costs are real. When Amazon.com went offline for several hours during its early days, its stock dropped 25 percent in a single day!

Information technology is woven into the fabric of almost every business. When information systems are not functioning, business stops; both your staff and customers are left hanging and frustrated.

The cost of network downtime is as real as the cost of goods sold or the cost to manufacture a product.

Don’t be cost-unconscious. It’s not a matter of if your network will go down; it’s a matter of when. Will it go down for planned maintenance, with minimum disruption, or will it go down when your staff and customers need it most? The choice is largely yours.

Tim Hebert is Chief Executive Officer with Atrion Networking Corporation, in Warwick, R.I., a systems integrator and network services provider. He can be contacted at thebert@atrion.net or 401-736-6400.

Contributor: Tim Hebert

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Classification: Business

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