Downtime, the unwelcome guest that crashes your digital party, can range from frustrating to life-threatening for customers. But for organizations, it's a financial nightmare. The costs of downtime, such as lost revenue, regulatory fines, and additional marketing spend post-incident, are well-known. However, other, less visible costs, such as innovation loss, delayed time-to-market, and tarnished brand reputation, can be just as economically impactful.
While Splunk gathered survey data to calculate the annual cost of downtime for its new The Hidden Costs of Downtime research report, Perspectives had the unique opportunity to interview top executives from Global 2000 companies, capturing their thoughts on everything from downtime’s costly consequences to how their organizations address incidents.
Here is what four experienced Global 2000 executives from the finance, retail, and telecommunications industries had to say about downtime at their organizations.
On the direct costs of downtime
The economic impact of downtime sweeps across an entire organization. Because its costs aren't aren’t limited to a single department or category, downtime isn’t just a technical concern, it’s a business one, too.
The report reveals that downtime costs Global 2000 companies a staggering $400B each year. That’s $200M per company, roughly 9% of profits. Each minute of downtime costs $9,000 or $540,000 per hour. At $49M per year, lost revenue is the highest direct cost, but other direct costs make an impact as well. There are regulatory fines, which average $22M per year, and marketing spend post-incident to win back customer trust, which can cost a company roughly $27M.
Here’s what Poonam Khemwani, Executive Director, IT and Cloud Security Architecture at JPMorgan Chase said about the direct costs of downtime:
“Downtime can be a few seconds up to a few days. It could be anywhere from a couple of thousand dollars for our lower critical apps to a couple million, and I'm talking around $15 to $30 million for each downtime that we have.”
- Poonam Khemwani, Executive Director, IT and Cloud Security Architecture, JPMorgan Chase
On the hidden costs of downtime
You can’t ignore the impact of downtime's hidden costs, such as customer loss and reputation damage. 29% of all respondents say they’ve lost customers due to downtime, while another 44% claim that downtime damages their reputation. Worse, CMOs report that it takes about 60 days for brand health to recover after remediating an incident.
Here’s how a VP of a large U.S. telecommunications company said downtime could damage his brand’s reputation and strategies that could diminish the impact:
“Let's say our service is down for 30 minutes during a live sports broadcast. That is serious reputational damage, and we might have to make up for it by making good to our customers. Now, making good could mean some discounts. It could mean financial impact to us. It could be many things just to preserve the customer sentiment and to reduce that reputational damage.”
- A VP of Cybersecurity at a large U.S. telecommunications company
On detecting downtime
It's never good when your customers know more about your digital experience than you. Yet, 41% of tech execs admit customers are "often" or "always" the first to detect downtime. Not only can this ruin the customer experience, but it can also dilute loyalty and damage public perception. As a finance executive acknowledges, this is an all-too-common occurrence:
“The end users will be telling us long before our monitoring systems have gone red.”
- Chris Russell Miller, Head of IT and Cyber Risk, BNP Paribas Personal Finance UK
On tools
The Hidden Costs of Downtime report reveals that 56% of downtime results from security incidents, while 44% is caused by application or infrastructure issues. On average, companies spend $23.8M on cybersecurity tools and $19.5M on observability tools each year.
Knowing that downtime can come from anywhere, the most resilient organizations think holistically about their investments, prioritizing solutions that can address both causes and unite teams. Complete visibility across SecOps, ITOps, and engineering is crucial. Teams that share tools, data, and context collaborate more efficiently, identify and fix problems faster, and get systems back up and running quicker.
Here’s how Luca Panattoni, an executive at major retailer Carrefour, put it:
“We want to teach the cybersecurity team the complexity of IT operations and the other way around. We plan to invest a lot in order to merge the systems because...separated for us, it's not a benefit.”
- Luca Panattoni, Head of IT and Digital Transformation, Carrefour
Preventing downtime, protecting profits
Executives from the Global 2000 companies agree that downtime is a significant threat to businesses. To maintain digital resilience and secure long-term success, it's crucial to understand and address the financial impacts of downtime. This includes adopting comprehensive recovery plans for swift and effective responses to any disruption and investing in proactive solutions to stay ahead of potential problems to protect your bottom line.
For more insights on downtime’s hidden costs and recommendations for deterring downtime, read The Hidden Costs of Downtime report.
