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3 Hidden and Apparent Costs of IT Downtime

11/23/2021
|
10 mins read
written by
Dhoof Mohamed
Image result for closed business

Days of chaos. Disgruntled employees and clients. Loss of capital at an exponential rate.

Experiencing IT downtime can be one of the most costly and strenuous experiences for a business. More than 90% of businesses experience downtime at some point and the reality is most businesses are ill-prepared. Brand damage, loss of productivity and capital loss are some of the major consequences of IT downtime. Depending on the nature of the business, the damage caused by IT downtime can vary significantly and may lead to the closing of business.

Capital Loss:

The first and most apparent result from an IT failure is the amount of money the business loses. There are several factors that can greatly influence how much a business actually loses. First, the size of the business greatly influences the damage from IT failure. Small to medium size businesses on average lose about $20,000 per hour due to IT time. Larger businesses accumulate over $100,000 per hour and can cost into the millions depending on the vastness of the business. The costs estimated will likely include payroll, revenue loss and cost of operations during the downtime. During this period, vendor and suppliers still expect to be paid which can complicate the downtime. 

Brand Damage:

Damage to your business’ brand is one of the most overlooked aspects of IT downtime. During downtime, your business will likely accumulate many complaints from clients and customers. For companies that are B2C like an e-commerce business where the customers are individuals ordering products, your brand can be ruined with hundreds if not thousands of negative reviews. Your business can endure the consequences of IT downtime for months from bad press, returned items and failed customer acquisitions. If your business is B2B where you deal with clients that are larger businesses, you may face legal consequences in addition to refunding clients’ money. IT downtime can result in data loss for your clients which can further complicate the legal ramifications. 

Productivity Loss:

Productivity loss is another overlooked side effect of IT downtime. The loss in productivity ranges depending on the sector or the nature of the business. For example, an e-commerce business that uses some automation in warehouses can lose on thousands of products being delivered. For small to medium sized businesses, the productivity loss will likely include the halting of current projects employees are working on or missing/delaying  deadlines for clients. For larger businesses, the productivity loss is multi-pronged due to opportunity cost. First, customer acquisition during the downtime is stopped. Skilled/technical employees like doctors or engineers are unable to do some of the critical work that uphold the business. Also, the amount of idle time employees waste during the downtime cannot be regained and the business is still required to meet payroll. 

For more information, try out Skyriver IT’s downtime calculator to estimate the cost of IT Downtime.

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