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Data center resilience and downtime risk

Know what downtime could cost when redundancy is no longer the whole answer.

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Data center downtime is where availability commitments start to carry a visible cost.

Uptime Institute’s 2026 outage analysis found that one in five data center outages can cost above $1 million. That gives the risk a scale, but not a business-specific answer. The real question is what downtime costs when it is your sites, your customers, your service-level agreements (SLAs), and your recovery plan under pressure.

For most operators, resilience is not an abstract ambition. It is already built into data center sites through N+1 or 2N redundancy, failover design, uninterruptible power supply (UPS) systems, generators, disaster recovery planning, uptime targets, and availability commitments. Across a growing portfolio, that architecture also sits next to SLA exposure, customer expectations, and project finance questions that become much harder to answer once an outage is already underway.

That resilience investment changes the odds. It can reduce your probability of downtime, improve your first response, and give your teams more control when something goes wrong. What it cannot do is remove the financial consequences to your business if service is disrupted.

That is where the conversation has to move from availability to consequence. Direct recovery costs, revenue disruption, service credits, rent abatements, reputational impact, and customer obligations may all be tied to the same downtime event. Marsh helps data center owners, operators, investors, and risk teams assess that residual exposure, understand how it connects across business interruption, contingent business interruption, contracts and portfolio resilience, and consider where risk transfer may need to be reviewed.

What data center downtime actually costs

When data center downtime happens, the cost usually comes in layers. First, there is the cost of getting back online: diagnosis, repair, emergency procurement, temporary power, additional labor, and customer support. Those costs are visible because they show up quickly.

Then, the interruption starts moving through the business. If capacity is unavailable, workloads are delayed or services are degraded, and the cost can move into revenue disruption, customer obligations, and contract terms. Service credits, service-level agreement (SLA) penalties, rent abatements and other remedies can make the commercial impact look very different from the original technical event.

Reputation can add another layer. A short disruption can still create difficult conversations if it affects the wrong customer, a regulated workload, a launch timeline, or a site that was expected to demonstrate high data center availability.

That is why average downtime figures only go so far. They prove the issue is material, but they do not size the exposure for your site or portfolio. A colocation facility, hyperscale site, enterprise data center, and portfolio owner can all carry different cost profiles. The exposure needs to be assessed against the business model, customer base, service commitments, insurance program, and contract terms behind it.

The resilience architecture operators invest in

Most data center operators have already spent heavily on keeping the service available. Redundancy is designed into the power and cooling path, with N+1 or 2N configurations that allow additional capacity to support the site if equipment fails or demand shifts.

Failover, UPS systems, and generators are part of that same resilience picture. They give the facility time, continuity, and control when a primary system is disrupted. Disaster recovery planning carries the work further, setting out how teams respond, how workloads are restored, how communications move, and how services are brought back within agreed recovery expectations.

Uptime and availability targets, including tier classifications, help customers, investors, and other stakeholders understand the level of resilience designed into a facility. These are not box-ticking exercises. They shape confidence in the site and the commitments that can reasonably be made around availability. All of that investment is why many data centers can absorb incidents that might otherwise become serious interruptions. But resilience architecture has a boundary. It can reduce the chance of downtime and help shorten disruption. It cannot, by itself, size the commercial effect of an outage, show how contract remedies may apply, or test whether the insurance program reflects the scenarios the business actually faces.

The risks that resilience investments cannot fully absorb

Resilience architecture can do a lot. It can provide the site with backup capacity, alternative pathways, failover options, and recovery procedures when something goes wrong. It can help teams respond faster and keep disruption from spreading further than it needs to.

However, there are still risks that it cannot fully absorb. A downtime event may start outside the facility altogether. Utility interruption, grid instability, supplier failure, fuel disruption, labor shortage, upstream service failure, or a cyber event can all affect availability even when the site itself has been built with redundancy in mind. A natural catastrophe can make that harder again, especially where multiple facilities, suppliers, or routes sit in the same affected region.

Then, there is the issue of how failures connect. One event can trigger a second problem, expose a shared dependency, or create pressure across multiple sites. A power issue may affect cooling, a supplier issue may delay recovery, or a cyber event may interrupt systems that were expected to support failover. At portfolio scale, those interdependencies can make downtime risk much wider than a single-site resilience review suggests.

Redundancy can lower how often something fails. What it cannot decide is what the interruption costs once downtime reaches the business. Service credits, SLA penalties, revenue disruption, customer confidence, renewal discussions, reputational impact, and investor questions can all gather around the same event very quickly.

That residual consequence needs to be handled differently. Once downtime moves into contracts, revenue, customer obligations, and insurance recovery, the engineering work can only carry part of the load. The remaining exposure needs to be tested against realistic downtime scenarios, then reviewed through the risk transfer arrangements, contract terms, and business interruption position sitting around the asset.

Downtime risk at portfolio scale

A single-site view can miss what connects the risk across the portfolio. At portfolio scale, data center operators may carry aggregation and interdependency risk that is not obvious when each facility is reviewed on its own. One utility issue, supplier failure, cyber event, natural catastrophe, or regional disruption can affect multiple sites, shared services, or customer commitments at the same time.

That is important because the cost of downtime is shaped by more than the physical location of the event. It is shaped by where revenue is attached, which customers are affected, what dependencies sit upstream, whether the same weakness appears across more than one site, and what the contracts say.

This is where Marsh’s asset, revenue and contracts — or ARC — lens is useful. ARC stands for assets, revenue, and contracts. In practice, it means looking at the asset that may be disrupted, the revenue or service obligation connected to it, and the contract terms that may influence where the cost sits. For downtime risk, that includes SLAs, power purchase agreements (PPAs), customer commitments, and other obligations that can shape who carries the consequence.

The portfolio question is not only “which site is resilient?” It is also “which dependencies are shared, which obligations are connected, and where could one event create several cost issues at once?”

Business interruption: the financial layer

One of those questions is also financial. So, if one event can create several cost issues at once, which part of that loss sits with the operator, and which part may be addressed through insurance?

Business interruption (BI) and contingent business interruption (CBI) cover sit beside redundancy, disaster recovery, and uptime planning. They are not a replacement for operational resilience. They are the financial layer around it.

On the one hand, BI cover may be relevant where downtime affects the operator’s own revenue or operating position. On the other hand, CBI cover may be relevant where the disruption begins at a dependency, such as a utility, supplier, upstream provider, network dependency, or other third party. In both cases, the response depends on the cause of loss, policy wording, physical damage triggers, waiting periods, limits, and other terms.

That distinction is very important at the portfolio scale. While a site-level outage, utility failure, and upstream provider issue may all interrupt service, they do not ask the same thing of the insurance program. The coverage question changes with where the event starts, which dependency is involved and how the loss moves through customer commitments.

For operators, the useful work is to test BI and CBI cover against the downtime scenarios the business actually faces. That means looking at site-level outages, third-party dependency failures, portfolio-wide events, service credits, customer remedies, and the timing of recovery before a loss puts those assumptions under pressure.

This is how BI and CBI become part of resilience planning. They add the financial layer around operational continuity, so downtime risk is assessed through both the systems designed to keep services running and the cover that may respond when disruption still occurs.

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How Marsh helps you stress-test downtime risk

Marsh helps data center owners, operators, investors, and risk teams test whether their risk-transfer arrangements match the downtime scenarios the business actually faces.

A downtime and business interruption risk review can look at site-level outages, third-party dependency failures, cyber events, natural catastrophe disruption, utility issues, and portfolio-wide events. From there, Marsh can help assess how an interruption may move across the site, customer commitments, service-level agreements, insurance recovery, and wider financial position.

The review can also examine whether business interruption and contingent business interruption cover sit properly alongside the operator’s resilience model. That means looking at the relationship between operational continuity, revenue exposure, customer remedies, waiting periods, limits, policy wording, and dependency risk.

Marsh’s ARC model is the organizing lens of this process. By looking at assets, revenue, and contracts together, Marsh can help show where downtime may start, which obligations may be affected, and where the cost could sit across a single site or wider portfolio.

From there, the review moves from mapping to stress-testing. That can include reviewing whether BI and CBI assumptions, policy triggers, waiting periods, limits, service credits, and customer remedies have been tested against the business's realistic downtime scenarios.

FAQs

Data center downtime costs vary by business model, site, customer base, contracts, and duration of interruption. Costs can include direct recovery costs, revenue disruption, service credits, SLA penalties, rent abatements, emergency procurement, and reputational impact. Published industry figures can show the scale of the issue, but operators should assess their own exposure against their specific portfolio and contract position.

Data center redundancy is the backup capacity built into a facility so one equipment issue does not automatically become a service interruption. In practice, that can mean N+1 or 2N architecture, uninterruptible power supply (UPS) systems, generators, failover systems, and other measures designed to support data center uptime and availability when part of the infrastructure is under stress.

Data center disaster recovery is the plan for getting operations back after a disruption. It covers the systems, procedures, communications, failover steps, and testing needed to restore service, but the plan should not stop at technical recovery. Operators also need to understand what exposure may remain around revenue disruption, customer commitments, insurance response, and the time it takes to return to normal operations.

Insurance may respond to certain downtime-related losses, but coverage depends on the cause of loss, policy wording, physical damage triggers, waiting periods, limits, and other terms. Business interruption and contingent business interruption cover should be reviewed against realistic downtime scenarios before a loss occurs.

Contingent business interruption cover may apply where a business is affected by disruption at a third-party dependency, such as a supplier, utility, upstream provider, or other external party. For data center operators, this can be important where downtime risk depends on services or infrastructure outside the operator’s direct control.

Redundancy lowers the odds of downtime, but it does not settle what happens if disruption still reaches customers, contracts, or revenue. Service credits, SLA penalties, customer remedies, revenue disruption, reputational impact, and third-party dependency issues can still sit around the same event, and the risk can widen at portfolio scale if several sites rely on the same utility, supplier, network route, recovery process, or region. That is why redundancy needs to be reviewed alongside business interruption cover, contingent BI cover, contract terms, and portfolio interdependencies.

The main causes of data center downtime can include power disruption, cooling failure, equipment failure, human error, cyber events, network issues, utility interruption, supplier failure and natural catastrophe. The financial impact depends on how the event affects operations, customers, contracts and insurance recovery.

Operators can assess downtime risk across a portfolio by looking at shared dependencies, customer commitments, service-level agreements, third-party providers, utility exposure, geographic concentration, and insurance arrangements. A portfolio view helps identify where one event could affect multiple sites or obligations at the same time.

Why Marsh

Marsh currently works with 75% of the top 25 companies engaged in data centers and are a partner to 10 of the largest global technology companies by revenue. Our dedicated digital infrastructure integrates our extensive experience with energy providers — including grid, nuclear, and renewables — and deep relationships with contractors, private equity investors, and technology suppliers into one seamless practice.

Speak with a Marsh data center specialist

Once redundancy, disaster recovery, and uptime planning are in place, the next step is to understand the cost exposure they may not absorb. Speak with a Marsh data center specialist about a downtime and business interruption risk review, or download the report to see how downtime risk can move across assets, revenue, contracts, and the wider data center lifecycle.

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