IT Outages Cause Businesses $26.5 Billion in Lost Revenue Each Year, Survey
North American businesses suffer an average of 10 hours of IT downtime annually, collectively costing them $26.5 billion in revenue, according to a study released by CA Technologies Dec. 9.
In a series of interviews with CIOs, IT directors, and IT managers from 200 companies spanning the financial services, manufacturing, retail, and public sectors, researchers calculated the financial losses incurred when businesses cannot quickly recover from service outages. For the purposes of this study, outages are attributable to hardware failures or security breaches. The companies range in size from small businesses with 50 employees to large organizations with more than 1,000 employees.
Respondents estimated their ability to generate revenue is reduced by 29 percent, according to the study. Financial services are impacted the most by downtime, with the average company losing $224,000 or more in revenue each year. Public-sector organizations are impacted the least, with the average organization losing $99,000 in revenue, according to the report. However, the public sector tends to experience the highest amount of downtime, at an average of 16.6 hours per year, compared with the overall average of 10 hours, the report said.
In terms of total revenue, however, the retail sector is hit "significantly hardest," accounting for $18.8 billion in lost revenues per year, compared with the public sector's $4.46 billion.
Even after service is restored, businesses generally still experience an average of 7.5 hours where they are limited operationally because of data recovery issues, the report found. The ability to generate revenue is still impacted, by about 17 percent, IT managers told researchers.
Departments most likely to experience downtime are operations, at 62 percent, followed by finance, at 48 percent, and procurement, at 39 percent, according to CA.
In actual dollar amounts, small companies seem to do better, with the average small company losing about $55,000 in revenue each year, compared with an average large company losing $1 million. However, small companies appear to suffer more, with their ability to generate revenue reduced by 39 percent, compared with 19 percent for midsize companies and the overall average of 29 percent. Smaller companies also struggle with data recovery, with their revenue-generating abilities reduced by 23 percent, the report said.
Compared with a parallel study of 1,808 companies across 11 European countries earlier this year, North American organizations generally lose about 54 percent less revenue than their European counterparts, CA said. Researchers said that even though both regions suffer similar numbers of outages per year, outages at European companies tend to last longer. The total downtime per outage in Europe is 10.3 hours.
Despite the severity of outages being higher, European companies collectively lose $23.5 billion, or $3 billion less than the North American companies, according to the report.
The researchers wrote that "most of this considerable cost to businesses" can be "avoided" through better data protection strategies.
"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, general manager of data management at CA Technologies.
IT departments tend to focus on efficient ways to securely back up critical systems and neglect to consider the speed of recovery, the report said. With myriad products offering system and data protection, recovery, and availability, organizations can assess their existing disaster recovery plans to minimize the time required to be back up and running after an outage, the researchers wrote.
Crest said the ability to recover from physical hardware failure and data corruption will become "even more important" as businesses shift toward cloud services.