When I’m online shopping, reading an article, or watching a video and the website becomes unresponsive, it takes me about eight seconds before I refocus elsewhere. From the point of view of the industry, if customers lose interest when their server goes out, the cost of losing out on so much business can substantially impact revenue.
The average cost of downtime across all industries has historically been about $5,600 per minute, but recent studies have shown this cost has grown to about $9,000 per minute.
Of course, other factors play a role in this, such as:
- The size of the business: There’s a significant difference in downtime costs between larger and smaller companies. Relatively small businesses’ cost of downtime falls into a range of $137 to $427 per minute, whereas for larger businesses, the downtime can cost over $16,000 per minute ($1 million per hour) for just a short outage. Some examples include:
- In March 2015, Apple lost approximately $25 million over an outage lasting 12 hours
- In March 2019, Facebook had a 14-hour downtime costing them nearly $90 million
- In August 2016, Delta lost almost $150 million during five hours of downtime
- Industry vertical: Means a collection of companies that are more specialized or have a common niche in the market that are at higher risk. Some examples include finance, government, healthcare, manufacturing, media, retail, and transportation. Because these are higher-risk industries, their average cost of downtime tends to be over $5 million per hour.
- Business models: Play a big role, especially in distinguishing whether your storefront is primarily virtual or physical. An e-commerce business that relies on being digitally available to customers is more susceptible to losing revenue and customers from downtime than a store with a physical location. When your entire business is digitally-based, any time your website is inaccessible to customers results in lost revenue.
When considering these factors, the full range of downtime costs across all businesses ends up falling between $2,300 to $9,000 per minute.
Calculating Downtime
If you’re curious about how much your company’s downtime costs are, you can approximate them using the formula:
Downtime Cost = Minutes of Downtime x Cost per Minute
The cost per minute for small businesses lands around $427, whereas, for larger businesses, it’ll be closer to $9,000. While this formula will offer you quantitative data, it’s important to account for the other impacts resulting from outages. Some additional costs of downtime include:
- Customer Impact: This focuses on damage to the company’s reputation in terms of reliability, accessibility, and quality, as well as customer churn. With infinite options for every need in today’s digital markets, having a reliable platform with minimized downtime is necessary for low customer turnover.
- Company Productivity: Not only does downtime affect customers, but it also affects the company internally. Outages hinder progress toward organizational goals and ultimately delay the process of reaching results at a timely rate. On a smaller scale, it requires more attention from employees to resolve, which lowers day-to-day productivity.
- Employee Turnover: When a company has an outage or frequent outages, employees work twice as hard to get everything back online and communicate with frustrated customers. With every outage, employees lose company pride as the reliability of the organization decreases. These factors contribute to lower employee retention and an estimated $15,000 to find a replacement.
Cost of Downtime per Industry
About 98% of organizations claim only one hour of downtime costs over $100,000. Looking at each industry’s breakdown, we’ll find out if this is true.
In the IT industry, downtime is typically calculated at about $5,600 per minute. Depending on the company’s size, the full range of its lost revenue spans from $145,000 to $450,000 per hour.
In the auto industry, downtime costs rise to about $50,000 per minute, which translates to about $3 million per hour. Nearly 70% of the time, downtime issues can be attributed to people being unaware of their equipment’s maintenance or update requirements; another example of why it’s crucial to catch outages before they happen.
In the manufacturing industry, the cost of downtime is approximately $260,000 per hour. Manufacturers experience approximately 800 hours of downtime every year due to maintenance, tool breaks, adjustments, etc. Because so much of the business relies on technology running smoothly, the repercussions can be costly when you’re unable to catch it ahead of time.
In the enterprise industry, the cost of downtime is valued at over $1 million per hour and can reach $5 million, excluding fines or penalties. When taking into consideration server outages specifically, the average cost of downtime can go as high as $300,000 per minute due to lost business, productivity disruptions, and remediation efforts. In the past seven years, hourly downtime costs have risen 32% because of how much each industry now relies on its digital marketplace.
The cost of downtime for a few more industries include:
- Media at $90,000 per hour
- Health care at $636,000 per hour
- Retail at $1.1 million per hour
- Telecommunications at $2 million per hour
- The energy industry at $2.48 million per hour
And one of the most expensive costs of downtime is in the brokerage service industry, which clocks in at $6.48 million.
No matter what industry you’re in, downtime is expensive. With an increasingly virtual world, Solarwinds™ Pingdom® enables you to deliver exceptional customer experiences and enhanced visibility into how your consumers interact with your business. Using features like synthetic and real user monitoring, you’re able to catch issues with your digital storefront before they happen and gain visibility into how users are experiencing your website. Use Pingdom to avoid downtime and make the most of your business. Download a free trial here.
Sources:
https://www.the20.com/blog/the-cost-of-it-downtime/
