The High Price Of IT Downtime

Outages cost enterprises $700 billion a year, according to IHS study.

Joe Stanganelli

January 29, 2016

3 Min Read
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What if I told you that every network slowdown and every outright outage that your company suffers costs, on average, over a million dollars?

For large enterprises, these are the findings of a recent study of the cost of server, application and network downtime conducted by IHS in 2015 and released this week.

For this report, IHS surveyed 400 of its mid- to large-size clients throughout North America on their decision-makers' information and communication technology (ICT) downtime woes. For IHS purposes, midsize companies average approximately $100 million in revenues and 500 employees (within a range of 100 to 1,000 employees);  large enterprises average 13,000 employees and nearly $2 billion in revenues.

The result: Those surveyed reported an average of five downtime events each month, with each downtime event being expensive indeed: from $1 million a year for a typical midsize company to more than $60 million for a large enterprise.

Extrapolated out, that's a cost to North American companies of $700 billion a year for ICT outages. This includes lost employee productivity (78%), lost revenue (17%), and actual costs to fix the downtime issues (5%).

IT downtime causes

IHS reports that network interruptions are the biggest factor contributing to downtime, but what causes the actual network interruptions? Where does all of this costly downtime actually come from?

In an interview, Matthias Machowinski, research director for enterprise networks and video at IHS, told me that equipment is the major source of overall downtime, as measured in hours.

Indeed, according to Machowinski, equipment failures and other equipment problems contribute to close to 40% of all reported downtime. Service provider problems and internal human errors each make up nearly 25% of downtime.  Trailing these bête noires are system attacks, which, despite all of the cybersecurity hype these days, contribute to only about 10% of all downtime.

How to reduce IT downtime

Machowinski said the most popular technique for mitigating downtime is network-monitoring implementations. Sixty-four percent of respondents in the IHS study indicated that they are pursuing this strategy, and Machowinski thinks it's a good one.

"You don't want the user to be your early-warning system," he said. 

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The second-most popular downtime-mitigation technique (at about 57%) -- one that Machowinski especially recommends -- is incorporating more redundancy into networks. Added redundancy can solve both on-premises equipment failures and problems with hosted service providers, he said.

"Equipment is going to fail at some time or another," Machowinski said. With redundant networks, there's still some connectivity, even if backups aren't running at 100%, he explained.

To this end, he recommends "keeping spares on hand…or at least being able to source a spare relatively quickly – preferably same date, maybe within hours."  He further suggests that IT departments take advantage of premium support offerings from vendors in order to more efficiently source replacement equipment and keep downtime to a minimum.

Machowinski points out that there are a number of other things enterprise organizations can do and are doing in addition to these techniques to cut down on downtime, including better training, improving hiring processes, and increasing reliance on backup processes that are independent of ICT-based systems (e.g., good old-fashioned pen and paper).

"You really need to have a multi-pronged strategy [and] understand the effects of downtime and the importance of creating equipment that minimizes downtime within ICT infrastructure," Machowinski said. "[Downtime] is a serious issue that companies really need to take a hard look at, and I think it's a good example of where a small investment can have such tremendous benefits to a company."

About the Author(s)

Joe Stanganelli

Joe StanganelliAttorney, Beacon Hill LawJoe Stanganelli is founder and principal of Beacon Hill Law, a Boston-based general practice law firm. His expertise on legal topics has been sought for several major publications, including US News and World Report and Personal Real Estate Investor Magazine. Joe is also a professional communications consultant. He has been working with social media for many years, even in the days of local BBSs, well before the term "social media" was invented. From 2003 to 2005, Joe ran Grandpa George Productions, a New England entertainment and media production company. He has also worked as a professional actor, director, and producer, and playwright.

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