Network downtime costs — and how precisely one calculates them — is a subject that generates a lot of discussions online. Really, it’s a bit funny that we spend so much time online discussing what it will cost when we can’t get online.
The true cost of downtime in 2016 is difficult to pinpoint. Figures are bandied about liberally. An oft-quoted figure is Gartner’s estimate that put the cost of downtime in 2010 at a painful $5,600 per minute, while a more recent report by Emerson and the Ponemon Institute suggests that figure has climbed to $9,000 per minute. Experts offer a range of calculation methods for network downtime costs for different industries — because we can all agree that an hour of downtime for a startup is probably not equivalent to an hour of downtime experienced by a major corporation.
What is Driving Up the Cost of Being Down?
The one thing all the reports, projections, and statistics seem aligned in is this: regardless of industry, vertical, or business size, network downtime costs are increasing. But why?
The short answer is digital transformation. Around the globe, we are increasingly digitizing and automating processes of all kinds at an alarming speed, resulting in an entirely new business model —and that’s not a trend that’s likely to disappear. Digital transformation allows us to do more, with less — we’re relying on technology more and more to help us achieve our goals, whether those goals are to allow our customers to make a purchase with their mobile device or to automate whole departments to save on labor costs.
How Does Digital Transformation Increase Network Downtime Costs?
Network downtime costs are being driven up in a number of ways, thanks to digital transformation:
- Increased expectations
- Increased reliance on technology
- Increased productivity
Not really sure about the correlation here? Let’s take a closer look at each of those points.
1. Increased Expectations
In our digital, automated age of hyper-productivity, it’s only natural that expectations — from our customers, regulators, suppliers, and even our partners — have gone up. There is increased pressure to meet or exceed all those expectations, so when systems go down and you fall short of the mark, the impact (and the cost) is that much greater.
- Customers today enjoy unbridled entitlement. They are used to having their demands met, and have no qualms about moving on to your competition when you fail to deliver.
- Regulators must enforce increasingly stringent rules. To protect both the physical and virtual safety of your market, regulatory violations carry stiff penalties.
- Partners and suppliers are under the same pressures. There is no room for error or delay in modern product or service delivery. Your downtime can cost your partners and suppliers by delaying their systems, causing a cascade of costs for everyone in the chain.
2. Increased Reliance on Technology
When the first mechanized farm equipment was introduced, the improvement to the farmer was noticeable, of course, but the change was gradual. If a tractor broke down mid-task, the farmer still had a team of horses that could pull the plow. Work slowed down, but it didn’t stop.
When computers first started appearing in offices, paperwork was reduced and data entry went faster — but you can be sure that when programs malfunctioned, office professionals were still answering phones and writing down messages and appointments on paper.
Today, however, our reliance on technology has surpassed our ability to do without it. We don’t have alternate tools, nor would we know what to do with them if we did. The price of using technology to drive productivity and achieve that which was previously unthinkable is that, when systems slow or grind to a halt, so do we. Network downtime costs are skyrocketing because we can’t fall back to an alternate plan when our automated, digital systems fail.
3. Increased Productivity
That almost seems like a contradiction, doesn’t it? Surely if automation and digitization have allowed us to increase productivity, we can afford the occasional slowdown or stop? We could, except for this catch: digital transformation and the impact of technology on productivity has increased the value of our operating hours.
Let’s say you have a small widget production company that employs three people:
- In a manual environment, all three employees work from 8am to 4pm, producing five widgets an hour each, for a total of 120 widgets per day
- When you automate the system, you only need one employee to run a machine that produces 20 widgets an hour. Your three staff members work shifts, allowing you to run the machine 24 hours a day without increasing labor costs and you now produce 480 widgets per day
The value of one day of operation has increased by a factor of four — each day your company is offline, you’re losing the revenue from 480 widget sales instead of 120. And you still have to consider the cost of the machine that’s sitting there, unused. In the manual scenario, if an employee couldn’t work, you could send him or her home and at least save the cost of their wages — but the equipment you’ve purchased to increase productivity has to be paid for, whether it’s running or not.
Can You Afford Increasing Network Downtime Costs?
How much downtime your business can weather will depend on a number of factors, including whether or not your sales will be lost or just deferred, how much of your costs are staff-based vs. equipment-based, and how much of a hit your company’s reputation will take. Regardless of any of these, it’s critical that you take steps to mitigate the risk of outages as network downtime costs increase.
At Data Resolution FlexIT, we provide managed services to help protect your business against the rising costs of network downtime. Want information on managed backups, network redundancies, business continuity and disaster recovery plans? Get in touch with us today.