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BUSINESS

The severe impact of downtime on companies’ bottom lines

The severe impact of downtime on companies’ bottom lines 35

By Jon Lucas, Co-founder and Director at Hyve Managed Hosting

The advanced connectivity of today’s world has provided a platform for a sharp increase in the number of goods and services that are now available online. This has made the online world a goldmine not only for legacy companies that have been able to adapt adequately to online environments, but also to digital companies that have been born in the internet era. However, despite the opportunity, there are challenges and threats that come with the digital era. Customers now expect high availability from any business they spend money with, and if they experience downtime, even for a matter of seconds, they’re not likely to stick around.

An unexpected cloud outage can bring all business operations (including those directly linked to revenue) to an immediate and unceremonious halt. To prevent this eventuality, finance teams should work closely with IT departments to ensure their company’s digital infrastructure is sufficiently resilient – or risk incurring serious revenue losses, reputational damage and customer distrust. Here’s three things financial stakeholders need to consider when it comes to the importance of uptime: 

  • Customers won’t hang around for long

A few weeks ago, a major Cloudflare outage caused an hour-long outage – leaving businesses such as Shopify, Fitbit and Peloton unable to function properly as their websites crashed due to a policy update being incompatible with a new routing system. There are many reasons why sites might suffer downtime, but whatever the explanation, research has found that 2 in 5 (40%) of UK consumers would wait under a minute if faced with an online outage before switching to a competitor’s site. Hyve Managed Hosting’s 2022 research goes further, discovering that 34% of UK consumers would wait less than 30 seconds on an unresponsive site. Although the Cloudflare outage only lasted an hour, this research highlights how even a short outage can make a big difference. 

  • The true cost of an outage

Customers opting for competitors’ services will obviously have a direct impact on a company’s bottom line. In addition to lost customer revenue, it’s also worth considering the wider cost implications of an outage. For example, could repeated outages discourage investors from funding a company? What about potential partners – would they be put off from working with a company if their online presence was seen to be unreliable?

When everything is taken into consideration, downtime is becoming more and more costly for businesses. According to the Uptime Institute’s 2021 Global Data Center Survey, the cost of downtime is growing steadily. Over 60% of businesses have lost over $100,000 as a result of cloud outages. Meanwhile, of that 60%, 15% had lost more than $1 million.

As organisations continue to leverage the benefits of digital transformation, the cost of downtime is only likely to continue to climb.

  • Effect on brand reputation

It’s easy to see how customers and investors might be turned off by downtime, and how this would affect a business financially. But what about the financial consequences of a negative public perception?

Website outages inevitably feed into a brand’s reputation. For example, millennials are the least forgiving of website downtime; when sites go down it immediately causes a negative brand perception for 57% of this demographic. A negative reputation among customers and prospects is liable to stunt business growth, damaging loyalty and confidence in the brand and ultimately affecting sales and bottom-line growth.

The bottom line: how to avoid downtime

It is essential that these three implications of an outage are understood at the highest level of a business, so that effective change can be implemented to ensure business continuity.

Our advice is that business decision makers and other departments engage and communicate with IT teams to ensure their digital infrastructure is up to the job. It should be a priority to implement a system in which, even during periods of high traffic or peak activity, additional resources can be easily and dynamically added with ease, with no drop in performance. Resources can then be scaled back again when normal operating levels resume in order to manage costs. 

It’s also important to remember that internal IT teams can come under a lot of pressure when infrastructure is required to scale – be it a sudden requirement or planned. Added to this, there’s no point in the marketing department planning the perfect promotion and then the website suffering an outage when it goes live because no one thought to let IT know there was likely to be some extra traffic. Companies can solve this issue by working with managed service providers who can support internal teams by taking care of this process and ensuring it happens seamlessly.

Ultimately, an awareness of downtime and how to avoid it among the c-level ensures that the knowledge can be filtered throughout the company, connecting teams and giving the business the best shot at avoiding issues, retaining customers and protecting its bottom line.

 

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