In-Depth

Network Downtime: The Silent Killer

Network outages cost organizations tens of millions of dollars annually

• By Stephen Swoyer
• 02/22/2005

According to market research specialist Infonetics, large enterprises typically fritter away anywhere from 2 percent to 16 percent of their annual revenues because of losses associated with network downtime.

This translates into tens of millions or hundreds of millions of dollars annually.

Infonetics recently surveyed 230 companies (each with more than 1,000 employees) in five different verticals: finance, health care, transportation and logistics, manufacturing, and retail.

Even though network downtime is a fact of life in all market verticals, Infonetics researchers found that some are affected more than others.

“The finance and manufacturing verticals are bleeding the most, with the average financial institution experiencing 1,180 hours of downtime per year, costing them 16 percent of their annual revenue, or $222 million, and manufacturers are losing an average of 9 percent of their annual revenue,” said Jeff Wilson, principal analyst of Infonetics Research, in a statement.

On the other hand, companies in the health care and transportation/logistics verticals typically fare much better. “These verticals have a fairly low percentage of the workforce connected to the network,” Wilson explained. “The transportation and logistics market fares the best of the verticals we studied, losing just 2 percent of annual revenue to downtime, but that’s still an average of $32 million a year.”

Not surprisingly, application problems account for most of the downtime in all verticals, comprising anywhere from one-fifth to two-fifths of the total annual downtime cost. Similarly, the more distributed a company’s network is, the more prone it is to suffering service-provider interruptions. In this case, Infonetics said, retailers are affected the most, with service providers accounting for more than 30 percent of their downtime costs.

Elsewhere, human error accounts for about one-fifth of the downtime costs in all five verticals. In financial institutions, this percentage jumps to nearly one-third, Infonetics reported.