Outages cost enterprises $700 billion a year, according to IHS study.
You may have seen the commercial. It’s all over YouTube. A repair guy walks up to the front desk in an office building. “I’m here to fix the elevator,” he says. The guy behind the main desk responds, “Nothing’s wrong with the elevator.”
Cue the bouncy music and the neon icon for IBM’s Watson. In a friendly voice, Watson says, “My analysis of sensor and maintenance data indicates that Elevator 3 will malfunction in two days.”
But systems failures don’t just hit elevators. They’re everywhere. Of concern to us are the failures that impact IT operations. This problem is front-and-center in the news right now, because of the huge systems failure at British Airways over the holiday weekend.
Apparently, a power system in the company’s data center failed. This resulted in cancelled flights for more than 75,000 passengers, about $68 million in passenger reimbursement costs (not including hotel costs), and a 2.8 percent stock price drop of parent company, IAG.
In 2015, thousands of banking customers couldn’t cash their paychecks, right before a holiday weekend, because the bank HSBC screwed up a software update..
THE COST OF IT DOWNTIME
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 .
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%).
That will do for now. The point is, failures occur. According to Gartner, the average cost of IT downtime is $5,600 per minute for Large enterprises and $8,000 to $74,000 per hour for SMB. Plus, recovery time can be slow , Nationwide Insurance says 52% of SMBs would need up to three months to recover. Clearly the impact of unplanned outages that cause irretrievable loss of data is a game-changing event.
Finally, there is the impact on your customers. Even if you’re not a wholly web-centric business like Amazon, your customers will feel the pain. Your staff won’t have access to records or the information customers want, you won’t be able to service customers effectively, and in many cases, sales will be lost. What’s more, the reputational damage from this kind of event doesn’t go away quickly. Some customers may never come back, and some may stay away for months.
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.
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.