How much does system downtime cost?

How much does system downtime cost?

Oct 3, 2014


Organizations understand that system downtime can be extremely costly, particularly if databases are offline for days or even weeks.

Statistics from the American Sustainable Business Council and Small Business Majority estimate small companies lose a median average of US$3,000 a day due to unscheduled outages.

Figures from the Disaster Recovery Preparedness Council are even more troublesome; 20 per cent of organizations the institution surveyed reported losses of between $50,000 and $5 million due to downtime.

Investing in Oracle disaster recovery (DR) platforms can help to reduce downtime dramatically, enabling companies to switch over to a standby database when unforeseen circumstances would otherwise bring a halt to operations. However, for organizations without comprehensive DR solutions to underpin their processes, what is the potential impact to the bottom line?

Calculating this figure can be a challenge because while some expenses are obvious and tangible, others are much more difficult to quantify in dollar amounts.

Here are just some of the ways a business can lose money as a result of poor DR protocols.

Direct costs

When estimating total losses from a disaster, direct costs are typically the easiest to gauge, including:

Lost transactions: If customers are unable to access online purchasing systems, the company immediately suffers a sales hit that will be reflected in revenues.

Fines or penalties: Businesses that are unable to meet their obligations under a service level agreement due to a systems outage may face legal penalties.

Wages: Downtime can create a number of issues with wages. Not only will employees need to be paid - even if they can't work - but additional remedial staff may be required to get systems up and running again.

Inventory waste: In some industries, such as fast-moving consumer goods, products may have a shelf life. When systems collapse and transactions falter, these items can go to waste.

Indirect costs

There are a variety of intangible costs that can result from an unscheduled outage. These may be more difficult to calculate, but can be just as devastating as direct losses.

Poor public image: Brand damage after a large-scale systems failure is often severe, particularly if a security failing is at fault and customer data has been compromised.

Drop in morale: Employees often bear the brunt of frustration from suppliers, customers and partners, which will have an adverse impact on job satisfaction. If outages are common, it could even increase staff turnover.

Lost business: When customers or clients are unable to make purchases or access services online, they may permanently take their business elsewhere.

Stock market value: Organizations that experience downtime often see interest in their shares plummet. This results in further bad press and more problems for stocks, creating a vicious circle.

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