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Volume 27, Issue 3

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July 9, 2013

Short-term Price Tag Per IT Failure Averages $10.8M, According to Global Executive Survey

Compuware-Sponsored Study Reveals the True Business Costs of Poor Technology Performance

DETROIT – Compuware Corporation, (Nasdaq: CPWR), the technology performance company, today announced the results of a global survey measuring the financial impact on businesses when technology fails. The results quantify the significant long- and short-term costs to businesses when an IT failure occurs and identify secondary costs in productivity, production waste, customer satisfaction and more.

 

“Measuring IT performance, and in particular its impact on business in real financial terms, is a complicated activity and as a result, most companies fail to do so in a uniform and comprehensive manner,” said Paul Czarnik, Compuware CTO. “When we distilled this study to its most basic level, we arrived at a simple formula to help IT departments and business leaders to get on the same page, both in assessing the impact and more importantly, prioritizing and resourcing the path to recovery: Cost of the failure is equal to an individual incident’s financial impact – short and long term – multiplied by the frequency of that incident plus the time spent to return to normal operations.”

 

Got a Tech Performance Failure? That’ll be $10.8M, Please

Averaged across all respondents, the short-term costs to operations, sales and marketing for a single major technology issue was $10.8 million.

 

When examining the costs exclusively for those respondents that reported an impact in product recall, wasted product and sales and marketing specifically, the numbers increase dramatically:

 

·         Recalled and wasted product costs: $4M

·         Sales and marketing costs: $13M

·         Total short-term cost impact: $17M

 

One U.S.-based executive in the manufacturing industry summed up his company’s technology performance failure story this way: “When our distribution inventory databases went down, we couldn’t ship our product. Plus, we lost awareness of stock levels, causing us to resort to a manual count. The bottom line was a big loss in sales, plus some very upset customers.”

 

The Long Tail of a Technology Failure

Responses from executives around the globe and across industries indicate that the deeper you dig into the impact of technology performance, the bigger and longer lasting the ramifications.

 

How Widespread are Performance Failures?

A full 94 percent of the Line of Business (LoB) respondents said that a significant technology failure had occurred within the last three years, and more than 50 percent saying a failure has happened in the past three months. And it’s probably not an isolated incident: Over 80 percent of respondents said that the same failure has happened before, with almost 20 percent saying the failure has occurred three to five times before.

 

Description: Description: Chart_p23Top Long-term Impact of IT Failures

According to the Compuware survey, LoB owners cited loss of market share, loss of brand equity, reorganization issues and legal or government ramifications as the areas most impacted over the long-term.

 

How Long Does it Take to Recover?

The definition of getting “back to normal” after an IT performance failure depends on who you ask. Results from the survey show that LoB executives perceive the average time to full recovery to be 24 days; IT executives declare full recover after just 11 days.

 

Who Suffers the Most?

Measuring the Business Impact of Technology Performance
A Global Perspective - 2013
When asked to name the top five areas that are most critically dependent on efficient technology, respondents listed (in descending order of prominence) Customer Service, Finance, Sales and Marketing, Distribution and Supply Chain – indisputable evidence of the business-wide impact of a technology failure.          

 

How Do IT Performance Failures Impact IT?

Survey results show that responding to a technology performance failure is a resource-intensive undertaking. The most common reactions to those failures were:

 

·         Purchasing or upgrading software/hardware

·         Increasing IT training

·         Increasing IT staffing

·         Hiring an IT consulting firm 

 

In other words, more technology expenses, more IT complexity and more people – internal or contractor – introduced into these IT departments. A recent study commissioned by Cisco, entitled “Global IT Impact Survey,” backs up these important statistics. That survey showed that among its respondents “Almost three quarters (71 percent) report IT is deploying more applications than a year ago”.

 

“Every day, IT departments are asked to contribute more and more to the financial health of the business,” explained Czarnik. “They’re not just an operational expense anymore, they’re vital to the success of those same areas – customer service, supply chain, distribution, marketing. A thriving company by definition must have a thriving and respected IT department. The trick is finding a way to accomplish that in today’s budget-squeezing environment.”

 

Overcoming Technology Performance Issues Is Critical to the Business

“No company can roll back IT complexity,” summed up Czarnik. “It’s a fundamental fact of doing business today. With rising complexity and rising stakes, the price of failure has never been greater as this survey vividly reveals.”

 

To read the complete study, download an infographic highlighting the survey results, and see additional commentary from Paul Czarnik, visit Compuware.com/techfail.

 

About the Study

The “Measuring the Impact of Technology Performance” study was conducted for Compuware by Intellitrends during February and March of 2013 and surveyed 304 corporate executives and senior managers from companies in the U.S., Europe, Asia and Australia. Of the 304 participants, 250 were LoB and 54 were IT. The annual revenues of the companies involved are as follows: 33% at more than $10B; 16% between $5 and $9.9B; 25% between $1 and $4.9B; 23% between $999.9M and $250M; and the remaining 3% at less than $250M. The participant companies represent four primary industries: retail, manufacturing, finance, and healthcare/pharmaceutical.

 

Compuware Corporation

Compuware Corporation, the technology performance company, makes technology make a difference by providing software, experts and best practices to ensure technology works well and delivers value. Compuware solutions make the world's most important technologies perform at their best for leading organizations worldwide, including 46 of the top 50 Fortune 500 companies and 12 of the top 20 most visited U.S. web sites. Learn more at: http://www.compuware.com.