IT System Downtime Costs $26.5 Billion A Year, Study Finds

CA-sponsored study shows downtime costs North American businesses some $159,000 per company per year, impacting mission critical services, operations, finance and procurement. SMBs shed about $15 billion per year from IT downtime.

December 12, 2010

D.H. Kass

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IT system downtown costs North American businesses $26.5 billion a year in lost revenue, largely because many organizations recover too slowly from a service outage, according to a new study commissioned by CA Technologies Inc.

The survey, conducted last month by Coleman Parkes Research Ltd., a U.K. based researcher, aimed to quantify financial losses companies incur when unable to quickly recover from service outages.

The researcher conducted online interviews with 200 chief information officers (CIO), chief operating officers (COO), operations directors, and IT directors and managers at an equal proportion of small, medium and large businesses in North America.

The study revealed that on average businesses in North America lose slightly more than $159,000 per company per year owing to IT downtime. As a group, small businesses lose about $15 billion from IT system downtime annually, more than any other segment in the study.

Moreover, IT system downtime constrains the ability of businesses in North America to generate revenue by 29 percent, the data showed. Indeed, downtime prompts a sales slip of 39 percent for small businesses compared to 28 percent for large companies and 19 percent for mid-sized organizations, according to survey data.

Participants in the study said that on average their businesses sustain 10 hours of IT downtime each year or more than 1.6 million hours in total when factored across the entire North American business community.

Businesses suffer another 7.5 hours of compromised operations as they try to recover lost data, amounting to an additional 1.25 million total hours of impaired performance across companies in North America annually, according to the study’s findings.

The respondents in the study estimated that even after a service outage is repaired, their ability to generate revenue with sub-par operations slips by an average of 17 percent.

Critical services most affected by downtime, retail hardest hit

More than 70 percent of the study’s participants said that IT downtime impacts mission critical services. Departments most likely to suffer downtime are operations, finance and procurement, the respondents said.

Retail loses more than $18 billion per year owing to IT downtime, about four times the $4.5 billion lost by the public sector and greater than 11 times that of manufacturing, which sheds about $1.57 annually from system downtime, according to the study’s findings.

Among market segments, IT downtime costs financial services firms an average of about $224,000 per year while public agencies drop some $99,000 annually, the data said. Public sector downtime averages about 16.6 hours per agency per year, compared to the overall average of 10 hours.

CA sponsored a similar study in 11 European countries last July in which the data showed that European businesses lose, on average, nearly $350,000 per company per year, more than twice that of North American businesses.

The vendor blamed longer outages in Europe for the higher losses. Total downtime in Europe, including time to recover the data, averages 10.3 hours per company per year compared to 7.9 hours in North America.

Better data protection can speed recovery from an outage

CA said that better data protection, improved infrastructure design, identification of business critical systems and data and tapping into the right partner can help businesses recovery more rapidly and effectively from a service outage.

“IT organizations can’t always prevent service outages, but they can take the right steps to improve the speed of recovery when outages occur,” said Mike Crest, CA general manager, Data Management.

“This will become even more important as businesses become increasingly dependent on both traditional and cloud IT services for the ongoing generation of revenue,” Crest said.

The study generated a report entitled The Avoidable Cost of Downtime 2010 in which the vendor offered some how-to tips and advice.

Specifically, CA suggested that to minimize costs from IT downtime, organizations should identify business critical systems and data so it can be recovered first; invest in infrastructures that provide the highest levels of availability; deploy a data protection solution for rapid recovery from downtime incidents; and, work with data protection specialists that understand an organization’s needs and deliver a complete solution.

TAGS: data protection,data recovery,downtime,CA Technologies,IT system

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