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The Steep Cost of Outages and Subpar Data Center Management

By: Blair Felter on June 21, 2019

According to a 2018 global reliability survey from Information Technology Intelligence Consulting (ITIC), 80% of businesses and their IT leaders require a minimum uptime of 99.99%. The intensifying demand is no coincidence either. The cost of downtime is simply too steep to accept anything less than four 9s.

Yet, even 99.99% uptime still equates to roughly 53 minutes of unplanned downtime over the course of a year. One more nine – 99.999% – will limit annual system downtime to just over five minutes. Seven 9s translates to just three seconds a year.

From power outages and hardware failures to human error and lack of routine maintenance, outages are the result of many problems. No matter the cause, data center outages come with steep costs – both direct and indirect.

Fortified data center management and uptime SLA (service level agreement) can have a great effect on business success. Unplanned system downtime can incur massive costs that go far beyond “mere” financial concerns, inflicting long-term brand damage and denying future opportunities.

The Financial Cost of Downtime

Evaluating the direct financial implications of data center outages depends on a great number of variables – from the industry and revenues to the timing and duration of the outage. E-commerce and banking businesses have some of the highest downtime costs thanks to their critical and high-volume data transactions. The size of a company is also a key factor in financial ramifications. Typically, the larger an organization, the more costly unplanned system downtime will be.

The root causes of downtime are often due to a reliance on infrastructure that can’t accommodate an organization’s true computing needs. The solution may require them to invest in new technology and redundancy systems that will not come cheap. Beyond the costs associated with repairing the cause of a data center outages, compliance violations and contract penalties loom as potential additions to the total cost.

Measuring the average cost of downtime is difficult since not every business is the same, but survey data shows that about a quarter of companies lost between $301,000 and $400,000 every hour their servers were unavailable. The cost was even higher for 57 percent of companies, with 14 percent losing more than five million dollars per hour.

Evaluating the impact system downtime can have on revenue is a relatively simple matter. To see how different uptime SLA guarantees could cost a company each month, be sure to check out vXchnge’s free SLA Uptime Calculator.

Indirect Operational Costs

Unplanned system downtime is hardly limited to the direct financial costs outlined above. A loss of service can inflict tremendous reputational damage on a company that can take years to recover from. Take, for instance, the scathing publicity Target received when one of its key vendors suffered an unexpected outage that inconvenienced customers across the US.

When a network goes down, IT teams quickly become overburdened trying to address the problem. Meanwhile, the employees affected by data center outages will either be limited in what work they can accomplish or have no way to complete any work at all. They may also lose their ability to communicate with other employees over the network. All of these factors not only diminish productivity, but also create a backlog of work that can cause disruption throughout a supply chain.

The total labor cost of downtime depends on how many employees are affected, how much they’re paid, the extent to which they’re limited, and how long the outage lasts. Not included in this formula, of course, are the potential missed opportunities that are lost during data center outages and the substantial overtime costs that might be needed to get things back on track.

Customer Costs

The erosion of consumer trust and confidence may compel customers to reevaluate services and switch to a different vendor to meet their needs, resulting in immediate loss of business. It also dissuades sales leads from choosing the business over its more reliable competitors. The most difficult effect to measure is how many future customers who would have considered a company previously will begin to look elsewhere to meet their business needs.

While it may be interesting to estimate the financial severity of an outage – and the poor data center management that likely led to it – there’s no guessing whether or not a business will suffer. The cost of downtime is steep, and limiting the possibility of data center outages is an absolute must.

Selecting a data center partner with a proven track record of high reliability backed by a strong uptime SLA is one of the most important choices any organization can make. Before making a decision, they should determine their exact colocation needs and evaluate how the facility is managed. A quality colocation data center should provide superior visibility in the form of sophisticated data center infrastructure management (DCIM) software (like vXchnge’s award-winning in\site platform) and also meet the most rigid auditing and compliance standards.

Avoiding the cost of downtime should be a major priority for every organization. With a reliable, carrier-neutral data center partner, they can ensure that their servers stay up and running to deliver the best service possible to their existing and potential customers.

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