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IT Outages Cost Businesses Billions

North American businesses lose $26.5 billion in revenue each year from IT system downtime with the biggest impact on SMBs, according to a CA Technologies report.

Daniel Dern

December 9, 2010

4 Min Read

Business are losing more than a quarter billion dollars annually due to IT system downtime with small companies suffering the most.

An independent study released Thursday reports that North American businesses "are collectively losing $26.5 billion in revenue each year as a result of slow recovery from IT system downtime," with an average loss of around $160,000. The average company suffers 10 hours of IT downtime a year -- which translates to more than 1.6 million hours across North America.

During these periods of downtime, "Respondents estimate that their ability to generate revenue is reduced by nearly a third (29%). Even after service is restored to critical systems, businesses experience an additional 7.5 hours of compromised operation because of the time it takes to recover lost data."

The study, commissioned by IT management software and solutions provider CA Technologies, surveyed in November 200 small, medium, and large companies in the retail, finance, manufacturing, and public-sector segments.

The study, said Steve Fairbanks, vice president of product management for data management at CA, "looked at the cost of outages or downtime to business-critical systems -- typically that would interfere with productivity or sales." According to report, "Small companies suffer the most during periods of downtime, showing the least ability to generate revenue -- 39% compared to 19% for medium-sized companies and 28% for large companies. A similar pattern emerged during recovery time -- 23% for small companies, 11% for medium, and 18% for large."

Charles King, principal analyst at Pund-IT, Inc., commented, "It's a good size sample group, and I like that they spread their survey across different industries and business sizes. The basic lesson is that IT reliability continues to be an issue that businesses need to be concerned about, especially for smaller businesses, where there's a smaller margin of error to deal with problems."

"IT outages reduce companies' ability to generate revenue by 29% -- for small businesses, close to 40%," said Fairbanks. "And even after the outage, while data is being restored, there's a 17% reduction (23% for small businesses) in reduced capacity to generate revenue while data is being restored and systems being reconfigured. So small businesses tend to be impacted even more by outages." For example, said Fairbanks, "A few months ago, I interviewed about 20 companies that had experienced downtime… one small health food storefront that its order-to-cash system on SQL had two drives in a RAID system fail. They were completely shut down for two to three days while they rebuilt the system that let them take orders. They were able to do a little business manually, but it had a large impact on their revenues and reputation. And since they did not have a good backup strategy in place, the backup failed, so when they were back up, doing taxes later that quarter meant they had to recreate thousands of records by hand."

Given most companies' reliance on IT for daily operations and for sales, it's no surprise that outages of mission-critical IT systems typically means lost productivity and lost revenue. What may be surprising to some are the findings on just how big these costs are -- and that they aren't just for during the time of the outage, but also during the period while systems and data are being restored.

King said, "The numbers are somewhat shocking, the possible losses of billions of dollars, distributed among many companies. On the plus side, smaller businesses can take comfort in the fact that they have more options and opportunities than ever to keep their businesses up and running, including better hardware, and new cloud and managed services."

The results, according to Fairbanks, "mean that the ROI for accelerating data recovery may be greater than people realize. It's important for small businesses to look at the impact of outages and the ROI for faster recovery, rather than just the hard cost of recovery offerings. ROI on data protection and recovery can be realized much faster if you take these statistics into account."

"Over 50% of the companies surveyed do not have a good Disaster Recovery plan in place," Fairbanks noted. "But downtime is avoidable if there's a good plan and solutions in place."

About the Author(s)

Daniel Dern

Contributor

Daniel P. Dern is an independent technology and business writer. He can be reached via email at [email protected]; his website, www.dern.com; or his technology blog, TryingTechnology.com

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