However, unlike death and taxes, companies can avoid the adverse effects of downtime. The key is to grow digital resilience to bounce back quickly or risk losing customers, paying hefty fines, and becoming headline news. All told, these consequences significantly impact the bottom line. But how much?
$400 billion annually across the Global 2000. That’s $200M per company, roughly 9% of profits. Today, we present our findings in our new report, The Hidden Costs of Downtime. In partnership with global research institute Oxford Economics, we surveyed 2,000 technology, finance, and marketing executives from 53 countries and 10 industries to quantify the costs of downtime (any service degradation or outage), pinpoint its most frequent culprits, and reveal how resilient organizations circumvent the costly collateral.
On average, companies lose $49M in revenue each year because of downtime, making it the highest direct cost organizations encounter. At $22M, regulatory fines are the second biggest financial blow. However, our research reveals that’s just the tip of the iceberg.
Beneath the surface, hidden costs like loss of innovation and reputation damage can dent even the most sizable company. Downtime causes a ripple effect throughout an organization. Seventy-four percent of security, IT, and engineering executives experience delayed time-to-market due to downtime, while CMOs report an average of 60 days for brand health to recover post-remediation. Critically, a company’s stock price drops 2.5% on average after a single downtime event — with a monthslong recovery period.
The dual origins of downtime
Much of the conversation around downtime emphasizes ITOps or engineering causes. However, our data reveals that 56% of downtime stems from cybersecurity incidents, while 44% comes from application or infrastructure issues. Downtime can come from anywhere, exerting constant pressure on businesses.
Regardless of origin, human error — like misconfiguring software or infrastructure that leads to performance errors or security gaps — is the number one culprit of downtime. It’s also the toughest to find and fix, with an MTTR of 67-76 hours. That’s 2 to 3 days of sleepless nights and expensive war rooms.
But there is a silver lining: Most technology executives say their cybersecurity and observability tools are “helpful” or “extremely helpful” in addressing downtime. And their CFOs agree with this sentiment, claiming a solid ROI.
Other advantageous investments include generative AI. Over half of technology respondents already use generative AI features embedded into existing tools (such as domain-specific chat experiences) to address downtime, with 64% claiming substantial rewards. But its benefits aren’t just limited to downtime mitigation: These AI assistants can improve operational efficiency and help fill in employee skill gaps, strengthening organizations in the long run.
Steering clear of downtime
Our research reveals that the most digitally resilient organizations experience less downtime, fix problems faster, and incur less financial damage, saving on average $50M per year on the most significant direct costs. Meanwhile, faster recovery translates to less lost revenue and “bad press,” and fewer dissatisfied customers. Thankfully, any company can emulate this elite group by building robust and collaborative systems and processes that help mitigate downtime in the first place. A few tips for success:
- Adopt a zero-tolerance mindset toward downtime.
- Find and fix root causes during postmortems to prevent repeat issues.
- Invest in proactive approaches like AI and ML-driven solutions for pattern recognition.
The majority of technology executives surveyed admit that the negative impacts they experience from downtime are unacceptable. With downtime’s financial consequences quantified, digital resilience is now table stakes for every organization, board, and technology leader to succeed in the long run.
Read the full report to learn more, including downtime’s unequal impact on industries and regions and Splunk experts' recommendations on championing a more resilient business.
