Power Protection: Survey Reveals Most Companies Underestimate Financial Impact of Downtime

December 13, 2011

By Rajani Baburajan - Power Protection Contributor

A recent survey from Stratus Technologies (News - Alert) and ITIC Corporation finds that more than half of the businesses (52 percent) do not know the potential financial impact of IT downtime and the impact it can have on their bottom line and reputation.

The survey also found that even though 48 percent of companies currently calculate the cost of IT downtime, most of them still drastically underestimate the actual costs of outages, the ensuing remediation efforts, customer dissatisfaction, and the increased potential of litigation.

For example, 35 percent of survey respondents believe that one-hour of downtime for their most business critical applications will cost their company $25,000 or less, which shows they are underestimating the adverse impact that IT downtime can have on their entire businesses.

Aberdeen (News - Alert) Group has estimated that the financial impact of recession could be $110,000 an hour or more for an average company. Only 10 percent of survey respondents report the financial impact of recession will be $150,000 or greater per hour, which is closer to most industry estimates.

Customer satisfaction is another factor that contributes to their cost of IT downtime. However, 38 percent of businesses do not consider damage to their company's reputation as a contributing factor to the financial impact.

Further, 81 percent of survey respondents do not calculate goods and materials lost into their cost of IT downtime, and 45 percent of businesses don't even consider lost sales revenue as a factor of their IT downtime cost.

Many businesses are reluctant to calculating the cost of IT downtime with 52 percent of survey respondents saying they do not calculate the hourly cost of downtime on their business. However, there has been a slight increase in awareness, the report said.

"It's shocking that so many businesses have no idea what their cost of downtime is," said Roy Sanford, chief marketing officer at Stratus Technologies, in a statement. "Equally surprising is the fact that people who claim to measure downtime cost fail to include major cost contributors in their calculations.”

There are so many ways that IT downtime can hurt businesses, from lost revenue to reputation damage to lost productivity, Sanford added. One quarter of the businesses participated in the survey failed to factor in lost manpower hours. They are making technology and staffing decisions without having full awareness of the actual financial impact that IT downtime can have on them.

One company that is well aware of the implications of downtime for a business is Minuteman UPS/Para Systems (News - Alert), a leading provider of power protection technologies. In fact, a few months ago, Minuteman released a white paper that detailed how to prevent your business from suffering severe repercussions as a result of a power outage.

To learn more about the white paper and the importance of power protection, click here.

Rajani Baburajan is a contributing editor for TMCnet. To read more of Rajani's articles, please visit her columnist page.

Edited by Carrie Schmelkin