The costly impact of IT downtime on small and medium-sized businesses

IT downtime

No matter your industry or size, technology has become the backbone of business operations. From the local coffee shop that relies on a point-of-sale (POS) system to process payments, to the mid-sized manufacturing company utilizing sophisticated software for inventory management, technology is integral to the smooth functioning of small and medium-sized businesses (SMBs). However, when IT outages or IT downtime occur, the financial implications can be substantial.

The cost of IT downtime

According to a 2014 study by Gartner, the average cost of IT downtime is estimated at $5,600 per minute. While this number will vary depending on the size and nature of your business, it underscores the potential severity of an IT outage. For a small business, even just an hour of downtime can equate to significant lost revenue and productivity.

Take a local retail store for example. Imagine their POS system goes down during peak hours — not only are they unable to process sales, but they also lose customer trust, which could have long-term repercussions on their brand reputation. It’s even worse in eCommerce — according to a Baymard Study, nearly 70% of eShopping Carts are abandoned just from poor checkout design. The stats are probably a lot higher if your systems go down themselves. Both scenarios translate to a hefty price tag for a small retail business, where every sale counts.

Similarly, for a medium-sized manufacturing company, a server outage could halt production lines, disrupting the supply chain and leading to significant financial losses. In a 2017 report by Deloitte, unplanned downtime cost industrial manufacturers an estimated $50 billion annually. Now, the leading cause of that was aging equipment, but IT downtime is part of that very large number.

IT downtime can also have indirect costs. When IT systems are down, employees are unable to work effectively, leading to decreased productivity. According to a 2021 Tech Channel article:

Hourly downtime costs have risen 32% in the last seven years. The increased costs are attributable to the ongoing COVID-19 global pandemic, which exacerbated other issues. These include a 42% spike in security hacks and data breaches over the last 20 months and supply chain disruptions which caused price increases in computers, servers and component parts. Remote learning and remote working situations also contributed to rising hourly downtime expenses because they placed greater administrative burdens on IT departments and security professionals.

Moreover, downtime can lead to data loss, especially if businesses don’t have a robust backup and recovery solution. This can be a critical blow for SMBs, as they may not have the resources to recover lost data, leading to further financial strain. A 2019 study by the University of Texas revealed that 94% of companies suffering from a catastrophic data loss do not survive – 43% never reopen and 51% close within two years.

How to limit IT downtime

The good news is that these disasters can often be prevented with proactive IT management. Regular system maintenance, robust data backup and recovery plans, and up-to-date cybersecurity measures can significantly reduce the risk of IT downtime. According to a survey by CompTIA suggests that 50% of companies who partnered with managed service providers were able to save 1-24% in annual IT costs, 33% saved 25-49%, while 13% reported savings of more than 50%.

IT outages and technology downtime can have far-reaching impacts on small and medium-sized businesses, not just in terms of immediate lost revenue but also in lost productivity, damage to brand reputation, and potential data loss. By investing in proactive IT management, SMBs can not only minimize the risk of IT outages but also ensure that they are better prepared to manage and recover from any unforeseen technology issues, thus protecting their bottom line.

This is also why so many SMBs are turning to Managed Service Providers (MSPs) to handle this part of their business. Outsourcing your SMB IT functions to a managed service provider (MSP) offers a cost-effective and efficient way to prevent IT downtime. Providers like Leverage specialize in delivering comprehensive, round-the-clock IT services tailored to your business needs. With a wealth of expertise, we can proactively monitor your systems, detect and address potential issues before they escalate into costly outages, and ensure that your systems are always up-to-date and secure. Furthermore, MSPs provide robust data backup and recovery solutions to protect your business from data loss. By leveraging the skills and resources of an MSP like Leverage, your business can focus on its core competencies, confident in the knowledge that your technology infrastructure is in expert hands.