Quantifying The Impact Of Downtime: What We Can Learn From Recent New York Times, Google, And Amazon Outages

Last week there were several of outages that got me thinking more about the cost of downtime. I get this question a lot: what is the industry average cost of downtime? I hate answering "it depends," but that's the truth. So much depends on the organization, the industry, the duration of the downtime, the number of people impacted, etc. And not all of it is about dollars and sense. Reputation, customer retention, employee satisfaction, and overall confidence can be shaken by even a short outage. Take, for example, the New York Times' mysterious outage on August 14, 2013, of around two hours. While two hours might not seem like much, in the middle of a news-heavy weekday, it made a lasting impression. The stock dropped, twitter exploded, and the Wall Street Journal dropped their paywall to try and capture readers. In this case, I argue the biggest impact of downtime was not the drop in stock price, but the loss of confidence and loss of competitive advantage.

Here is a very different example: Google experienced between one and five minutes of downtime (amazing that this is news, but it is), on August 17. While this outage reportedly cost the company upwards of $500,000 (making their hourly cost of downtime astronomical), but as a result, internet traffic overall dropped by 40%. Their biggest impact was on customers and strategic partner over the long term.

One last example: as I write this, Amazon.com is suffering an outage that is yet to be explained. The last major outage Amazon.com suffered was under an hour, but reportedly cost nearly $5 million in deferred revenue. This instantly spurred conversations, misinformation and doubts around Amazon Web Services (which appears to be operating just fine, according to their dashboards). There is the potential here for not only a large amount of deferred or lost revenue, but also reputation impacts on other products in the Amazon portfolio.

Not a great few weeks for uptime. Before you experience an outage, take the time to understand your impact of downtime, so you make sure to invest the resources to prevent downtime. Here is my quick list of inputs to an impact of downtime calculation:

  • Revenue losses
  • Impact to cash flow
  • Productivity losses
  • Compliance and/or reporting penalties
  • Penalties and loss of discounts
  • Impact to customers and strategic partners
  • Employee morale and employee confidence in IT
  • Damage to reputation and goodwill

Is there anything missing from this list? Let me know what you think!

Comments

Scare tactics

Let's not focus on the negatives alone.

1) some of these impacts apply only to retail, and others only to a public facing system. I've seen systems down for two days without stopping the business process. Annoyed staff yes. Costs yes. Customer impact: minor delays.
2) the cost of higher availability must be weighed against the cost of downtime and a business decision taken on whether to invest. some outage is the cost of doing business. Most of us can't begin to aspire to the levels of availability Google and Amazon achieve. (and half a million bucks is way less than rounding error)

Good points, and for this

Good points, and for this post, I was specifically focusing on a few of the examples from the past week which all happened to be high profile and more retail oriented. I'm a big believer in right-sizing your resiliency and availability investments: one size does not fit all. And you're right, not every company should be investing in resiliency like Google and Amazon.

On the flip side, however, so many companies that I work with neglect to really think about the true impacts of downtime, beyond just dollars and cents. For example, what's the "cost" when a non-profit or a government agency experiences downtime? It's not zero just because they have no revenue. And just because a back office system goes down doesn't mean that the impact of downtime is zero either--these are the cases that productivity can be significantly impacted.

Thanks for your comment!

Many of my clients are

Many of my clients are government.

the impacts of downtime are:
1) reputation: stay out of the papers
2) flow of money
3) staff productivity

The last one is often surprisingly low: a system can be down for hours with minimal impact. there is lots of paper anyway, and other things to do, except for the most critical systems.

But oh boy! if you can't pay the dole on time...

Big Impact

System downtime has a big impact in a company's welfare and revenue, although this kind of issues cannot be prevented, it's very important to have a prepared plan on how to recover from the downtime and system loss. A plan that will work best if such downtime occur at a unexpected time.

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