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What's the economic cost of an outage? That's a $700 billion question.

Category: Blog

According to a Report by IHS, American businesses lose up to $700 billion a year due to IT downtime. Examining the frequency, length, cost and causes of outages due to server, application, and network failures, IHS calculated the cost based on company demographics, cost structure and downtime profile.

I grew up in the 80s and 90s in Canada and the United States. Those were the days when power outages were still fairly common (aside from the ones caused by inclement weather, that is). Speaking with colleagues who grew up in Singapore, this too was true. In recent decades–definitely since my move to Singapore–I’ve not experienced a single power outage.

I reckon many of you Gen Y and Gen Z folks have never experienced the fun (I use the word loosely) of knocking on neighbors’ doors to see if everything was all right, lighting up candles, or searching frantically in a darkened house for batteries for your dying flashlight.

What’s more common these days, however, are online outages:

  • In November 2018, residents living in the eastern part of Singapore found themselves cut off from their fiber broadband. The cause? A contractor who accidentally cut some fiber cables during construction work in eastside Singapore.
  • In October 2018, Google’s YouTube suffered an outage for a few hours, ruining many people’s morning viewing while sipping their first coffee routine. Google didn’t offer explanations for the downtime but tweeted updates.
  • In June 2018, Visa’s network crashed across Europe and the UK, much to the chagrin of consumers attempting to make purchases at supermarkets, gas stations, and elsewhere. Visa said in a statement that the outage was caused by a “hardware failure,” and not the result of a malicious event. The outage lasted 5 whole hours. Imagine all the hungry people at the supermarket this must have caused.

The economic cost of outages

Outages are a huge problem. They create lost opportunities affecting nearly everyone from consumers, retailers, gig economy workers; the list is endless. For businesses with any online presence this is a constant fear. It doesn’t matter how good the product or service is, if people aren’t able to access it. Over a third of consumers say they would abandon a website that takes more than 10 seconds to load.

If you can’t capture someone on your website, they’re off to your competitor’s site. Whoever offers the best experience–not just the best price–wins. I certainly have left brands when shopping on their sites proved too troublesome. In an age where experiences and choices matter, and there are usually a myriad of other options available, why deal with any unnecessary frustration?

These outages are lessons.

They make the case for redundancy and high availability. They beg the fundamental question, “What’s your maintenance strategy?” Do you need extra hands to manage your day to day infrastructure needs so you can focus on innovating?

Rand Group has a good post on calculating the economic cost of downtime. These are dependent on many factors, such as the duration of the outage, how many people were affected, and your industry. An e-commerce retailer versus a corporate website will have different tolerances for how an outage affects their businesses.

To really understand the cost of outages it may be helpful to look at not only how they work when individual companies are impacted but what can happen when they occur on a larger, more diverse scale. In a study by Darrell West at the Brookings Institution, the research team examined the impact on economies when governments shut down the internet. The study found 19 countries suffering a collective economic loss of $2.4 billion from 81 internet disruptions. Maintenance costs money but it begs the question – isn’t it better to invest there rather than lose big money?

Preparing for failures is a challenging task. After all, no one knows when an outage is going to happen. But I daresay, even in this day and age, it’s a good idea to check that your flashlights are working, and that you’ve a few spare batteries lying around in your home. It pays to be prepared and a good maintenance strategy that keeps your “house” in order is always a wise investment.

As history has shown, the flipside is the chance to lose millions, and risk suffering a huge dent to your brand’s reputation. After all, an outage is always a good reason for your customers to think twice about impulse purchase, or a chance for them to explore your competitors’ offerings.

As always, I’m eager to hear from you and your experiences with outages and your strategy in dealing with these incidents.

By Jason Ogden, Deputy General Manager, APAC

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