The cost of downtime varies by organisation but is rarely minimal. In this article we take a look at the impact and losses caused by Internet connectivity outages specifically.
What is the Cost of Downtime?
According to research completed by Beaming, in 2016 British businesses alone lost £7Billion due to Internet outages, with companies suffering an average of 3 days downtime each across the year. The same research found that:
- Over 75% of businesses experienced at least one connectivity failure which prevented them from trading or accessing vital online services
- Average time to restoration was 6 hours per outage
- 25% of businesses mitigated downtime costs by moving to tasks not requiring connectivity
- Only 13% of businesses had alternative connections in place for continuity
- Almost half (46%) of businesses suffered a negative financial impact within 4 hours of downtime, and 1 in 10 lost money immediately
Internet failure can be caused by a number of factors, from poorly configured network equipment and construction accidents, to hack attacks and animal damage. Whatever the cause, the cost of downtime which results is not insignificant as many organisations rely on online services for their critical applications. From accounting and ERP systems, to marketing, CRM and project tools, most business tools are cloud-based, and many organisations leverage VoIP telephone systems also. This means that when connectivity is lost, so are many of the core capabilities, and so downtime can hamper both the most minute and most critical processes.
How to Calculate the Cost of Downtime
While industry figures provide an indication of the scale of loss which downtime can cause, they are not so helpful in identifying an organisation’s own cost of downtime due to an Internet outage. There are many intricacies to calculating this accurately, with factors such as the following impacting the figure:
Day of the week and time of the day; downtime during a peak period will have much larger costs than downtime during an offline or quiet period.
Industry and business operations; high-level data transaction businesses such as retailers and banks will have greater downtime costs.
Time to recovery; the ability to quickly recover from an outage will minimise the cost of downtime dramatically.
Number of affected locations and people; if only a small percentage of your workforce or locations are likely to be affected then downtime costs are reduced.
Product and service; organisations with longer sales cycles or rarer products/services are less likely to lose revenue compared to those selling undifferentiated products easily bought elsewhere.
Length of downtime; it cannot be assumed that all hours of downtime have the same cost, for example one hour of lost staff productivity is easily recoverable without overtime, whereas 4 hours of lost productivity is not.
These factors aside, a simple place to start is to calculate basic revenue per working hour and cost of staff per hour which can provide an indicative figure of what financial losses downtime could cause for an organisation:
Revenue per working hour provides an indication of what turnover could potentially be lost per hour of downtime should it prevent the processing of sales transactions. It is calculated by simply dividing annual turnover by number of working hours in a year. E.g. a business with an annual turnover of £100,000 generated over 100 working hours, has a revenue per working hour of £1,000.
Cost of staff per hour provides an indication of what wasted salary costs could potentially be per hour of downtime should it limit employee capabilities to complete their work. It is calculated by dividing annual salary costs by number of working hours in a year. E.g. an organisation with annual salary costs of £50,000 and 100 working hours, has a cost of staff per hour of £500.
When calculating potential cost of downtime therefore, revenue per working hour and cost of staff per working hour can be added together and then multiplied by the number of expected hours downtime. E.g. should the above business experience 3 Internet outages in a year, each lasting an average of 6 hours (based on Beaming research), their expected cost of downtime costs could be £27,000 (£1,500 (£1,000+£500) x 18).
While this isn’t an exact figure, and the above factors also need to be considered as noted, it can provide an indicative figure to help organisations start to understand the potential financial impact of an Internet outage.
The Forgotten Costs of Downtime
While many organisations factor in obvious losses such as revenue and wasted salary, there are other direct costs to the business of downtime that are not initially so clear. For example:
- SLA, regulator or supplier penalties if downtime affects the organisation’s ability to deliver
- Additional salary costs if productivity is heavily impacted and requires overtime to recover
- Customer compensation (non-SLA), such as discount or gift vouchers to help repair brand damage
Furthermore, there are costs of downtime which are difficult to quantify and may have a much longer term impact on the business. These are foremost led by damage to the organisation’s reputation due to failure to deliver during the period of the outage, but others include employee and supplier frustration.
Combating the Costs of Downtime
The most effective method to reduce Internet / connectivity downtime is to put a failover solution in place. Legacy infrastructures may have turned to a secondary fixed line solution to provide failover, but today it is more cost and time efficient to leverage a 4G LTE solution. As well as being more efficient, a 4G LTE solution is also more effective than traditional failover options:
More diverse: Leveraging a completely separate connectivity technology to your primary line, it is unlikely to be affected by the same issue which takes this down. For example, animal damage, construction accidents, and so on could all affect a secondary failover line in the same way as the primary, making it completely useless – whereas a 4G LTE failover would not be, improving resilience.
Speeds time to resolution: A 4G LTE solution will kick in automatically when the primary line fails and have the affected location back online within minutes, meaning end users may not even notice an impact. Westbase.io 4G LTE failover solutions also enable Out-Of-Band-Management meaning that locations experiencing downtime will not only be kept online using the 4G LTE connection, but this connection can also be used to remotely troubleshoot the primary router to try and restore the network if it is a hardware issue – saving on unnecessary truck rolls and getting the primary connection back online as quickly as possible.
Highly scalable and flexible: As cellular networks are already in place and ready to be connected to, 4G LTE failover can be rolled out virtually anywhere within a very short time period. Westbase solutions are also completely agnostic; this means they can be seamlessly incorporated into the existing network infrastructure without interoperability issues, and also enables them to be connected to any mobile network to suit the best available signal for the deployment location.
To find out more about how 4G LTE for failover and OOBM can help to reduce the cost of downtime simply follow this link.