By Brendan O'Flaherty, CEO at cPacket Networks
One of
the key challenges we hear from customers is that while they understand the importance
of network visibility across the hybrid-cloud environment, it is not trivial to
justify it to management. It can be difficult to quantify the impact of network
visibility and measure clear return on investment (ROI) since its value comes
from preventing potential costs and losses that would otherwise be very
likely, such as those that result from security breaches, network downtime or
customer churn. Because these calculations aren't straightforward, the value can
often be overlooked and underappreciated.
That is, until something goes wrong. Network visibility is crucial to
the smooth operation and security of the network - whether that network is in
the cloud, data center or branch offices. Without it, keeping business-critical
services up and running and providing a good user experience to end users is
difficult at best, and impossible at worst.
To
justify the investment, network, applications and security teams need a clear way
to show the value network visibility
adds to their domains. My executive staff have developed a formula for this,
based on industry research and conversations with customers. Here it is:
Return
on Investment for Network Visibility = (Cost of Downtime + Cost of Attacks +
Cost of Productivity Losses + Cost of Customer Churn + Soft Costs) / Cost of
Network Visibility Solution
A
couple of caveats: first, this equation will
be more precise the more it can be customized to your specific situation and
business. In many cases, the data may be available from other business units that
are already tracking some of those metrics. Also, some cost areas may not apply
to certain businesses or verticals. Users should modify this formula if these costs
are more or less important to their organization.
Let's understand
what each of these cost areas include, and how to best calculate the specific
cost for your organization.
Cost of
Downtime
Businesses
like banks, airline companies or insurance providers make money via digital
services offered to users over their network. If the network or a particular
application goes down, they lose revenue. An estimate from Veeam Software found that downtime of an
application is between $61,000 and $67,000 per hour depending on how important
the application is. If the entire network goes down Gartner estimates that this costs on average $300,000 per hour!
To
calculate this cost, add the application and network downtime costs together
and multiply by the deployment frequency, failure rate (i.e. the likelihood of
a downtime event occurring) and Mean Time to Resolution (MTTR - how quickly you
can get back to normal operation). Reducing MTTR (which heavily depends on the
network monitoring the organization has in place) can reduce this cost
significantly.
Cost of
Attacks
Security
incidents and data breaches are another major cost that can be reduced or
prevented by proactive network visibility. Accenture Security and Ponemon have estimated that a malware attack costs $2.6 million on
average, and a data breach in the US costs $8.2 million (although this varies
based on industry). To further refine this cost estimate, calculate the revenue
that your specific organization would lose because of an attack (perhaps by
taking your company's average daily revenue multiplied by the average length of
the downtime caused by a security attack), add the cost of lost productivity
that prevented employees from being able to work, as well as containments
costs, upgrade/remediation costs, legal costs and any intangible costs from
things like reputation damage and bad press.
Cost of
Productivity Losses
Lost
productivity can occur either due to downtime or a security attack, but the
result is the same; employees can't perform their jobs because the network and
the applications they rely on are down. IT downtime wastes 545 hours per company per year on average per ERS IT
Solutions report. Again, you can use this general estimate in your
calculations, or determine this cost more accurately by multiplying employee
salary per hour times their work hours dependent on network utilization times
number of employees.
Cost of
Customer and Revenue Churn
Too
much network downtime might cause customers to take their business elsewhere.
Issues with jitter, latency, or long wait times to access applications and
services will quickly frustrate customers. 451 Research found that 70% of customers
are likely to switch providers if an application or service performs poorly.
Calculate
revenue churn over a period of time (such as a month, a quarter, or major
downtime event) by subtracting the monthly recurring revenue (MRR) at the end
of the time period from the MRR at the beginning of the time period, minus the
costs of any upgrades, divided by the MRR at the beginning. In other words: (MRR
start of period - MRR end of period - MRR in upgrades)/MRR start of period.
Soft
Costs
These
vary widely from organization to organization and can include negative
reputation, lost opportunity cost, loss of talent, etc. These are difficult to
quantify, but the ROI calculation will be more accurate if you can estimate and
include them.
So What's
the Real Cost of Network Visibility?
When
compared to all of these potential costs, the price of a network visibility
solution often seems quite low and definitely very low when considering the
business outcomes it produces for years to come.
And
keep in mind that visibility provides value nearly every day, not just during
catastrophic events, in terms of performance improvements or faster issue
resolution. For full effect, run this calculation after each downtime event and
see how the cost changes after implementing a network visibility solution fully
or partially. It is typical to see network visibility generate an ROI of over
2000%. Add it all up, and it's critical
information to help the c-suite understand how investing timely in a good network
visibility practice can save not only costs, but a lot of hassle. Business
impact may not be a straight line, but is nonetheless measurable and
impressive.
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About
the Author
Brendan serves as Chief Executive Officer of cPacket
Networks and has over 20 years of executive and leadership experience. Prior to
joining cPacket, Brendan was President and Chief Operating Officer at Massana
Semiconductor, where he led a successful acquisition by Agere Systems. Brendan
was also Chief Operating Officer and General Counsel for Aureal Systems, a
public audio technology company. Before his journey into corporate executive
management, Brendan led a successful career in Silicon Valley as an attorney
with the predecessor law firm to DLA Piper Rudnick, specializing in corporate
law, intellectual property, and mergers and acquisitions. Mr. O'Flaherty earned
his Bachelor's degree from Santa Clara University and a Doctorate in
Jurisprudence, Magna cum laude, from Santa Clara University Law School.