Quantifying The Impact Of Downtime

Last week there were several of outages that got me thinking more about the cost of downtime. I get this question a lot: what is the industry average cost of downtime? I hate answering "it depends," but that's the truth. So much depends on the organization, the industry, the duration of the downtime, the number of people impacted, etc. And not all of it is about dollars and sense. Reputation, customer retention, employee satisfaction, and overall confidence can be shaken by even a short outage. Take, for example, the New York Times' mysterious outage on August 14, 2013, of around two hours. While two hours might not seem like much, in the middle of a news-heavy weekday, it made a lasting impression. The stock dropped, twitter exploded, and the Wall Street Journal dropped their paywall to try and capture readers. In this case, I argue the biggest impact of downtime was not the drop in stock price, but the loss of confidence and loss of competitive advantage.

Here is a very different example: Google experienced between one and five minutes of downtime (amazing that this is news, but it is), on August 17. While this outage reportedly cost the company upwards of $500,000 (making their hourly cost of downtime astronomical), but as a result, internet traffic overall dropped by 40%. Their biggest impact was on customers and strategic partner over the long term.

One last example: as I write this, Amazon.com is suffering an outage that is yet to be explained. The last major outage Amazon.com suffered was under an hour, but reportedly cost nearly $5 millionin deferred revenue. This instantly spurred conversations, misinformation and doubts around Amazon Web Services (which appears to be operating just fine, according to their dashboards). There is the potential here for not only a large amount of deferred or lost revenue, but also reputation impacts on other products in the Amazon portfolio.

Not a great few weeks for uptime. Before you experience an outage, take the time to understand your impact of downtime, so you make sure to invest the resources to prevent downtime. Here is my quick list of inputs to an impact of downtime calculation:

• Revenue losses
• Impact to cash flow
• Productivity losses
• Compliance and/or reporting penalties
• Penalties and loss of discounts
• Impact to customers and strategic partners
• Employee morale and employee confidence in IT
• Damage to reputation and goodwill
  Rachel Dines is a Senior Analyst at Forrester Research serving Infrastrucure & Operations Professionals.