How Much Does Latency Actually Cost? Understanding Its Impact on Business

When businesses discuss performance, they often refer to productivity, throughput, or uptime. However, there’s another performance metric that quietly drains profits in nearly every operation — latency.

We call it the million-dollar ping because, in the right (or wrong) context, a few milliseconds can significantly impact profit and loss.

The Questions We’re Really Asking

1. How much does latency actually cost?

2. Where does network latency come from?

3. Why do traditional “faster internet” upgrades not fix it?

4. What investments actually reduce it long-term — without breaking budgets?

5. Latency Benchmarks: What’s Acceptable and What’s Costly?

   
   

Let’s answer those one by one. But first, let's define latency.

Latency Defined

Latency is the time it takes for data to travel from its source to its destination — usually measured in milliseconds (ms). It’s not bandwidth (how much data moves), but rather how fast that data makes the round trip. In business terms, it’s the pause between “click” and “response,” the lag between scanning a barcode and seeing confirmation, or the delay between your order and your supplier’s acknowledgment.

It’s invisible to most people, but it shapes everything from cloud app responsiveness to real-world profit margins.

1. How Much Does Latency Actually Cost?

Latency doesn’t appear on balance sheets, but it absolutely affects them. In financial systems, just 10 milliseconds of delay can cut 10% of trading revenue due to slower data execution and missed opportunities.

In logistics and manufacturing, a 100-millisecond delay in a cloud transaction can delay inventory scans, dispatch confirmations, or ERP updates — and that cascades into missed delivery windows, late fees, and overtime hours.

In e-commerce and ERP applications, every 100 milliseconds of added load time has been shown to reduce conversions by about 7%, while a 5-second delay sends bounce rates above 90%.

Latency is silent, but it’s not cheap.

2. Where Does Latency Come From?

It’s easy to blame your internet provider, and sometimes that’s fair. However, most latency originates inside the organization:

• Geographic routing inefficiencies — especially in Canada, where data often bounces through U.S. nodes before reaching Toronto-based users.

• Legacy switching infrastructure that can’t handle modern throughput.

• Congested Wi-Fi or poor AP placement, especially in cold storage or metal-heavy industrial environments.

• Multi-cloud traffic hairpinning — when data must exit one cloud to enter another over the public internet.

  
  

It’s death by a thousand milliseconds.

3. Why “Faster Internet” Doesn’t Fix It

We’ve seen businesses double their internet speed and see zero performance improvement. That’s because bandwidth doesn’t fix delay; it only increases capacity.

Think of it this way: A faster highway doesn’t help if the on-ramps are backed up and your GPS routes you 50 km out of the way. Latency is about distance, routing logic, and congestion — not just speed.

That’s why SD-WAN and edge computing are changing the game: they optimize how traffic moves, not just how much can move.

4. What Actually Works

Technology	How It Helps	Where It Matters Most
SD-WAN	Dynamically selects the fastest, lowest-latency path for each packet.	Multi-site operations, cloud access, logistics routing.
Load Balancing	Distributes traffic across links and servers to prevent bottlenecks.	ERP systems, transaction-heavy apps.
Edge Computing	Processes data close to where it’s generated.	Manufacturing lines, IoT devices, warehouse sensors.
Virtual Cloud Networking (e.g. Megaport)	Direct cloud-to-cloud routing avoids public internet detours.	SaaS-heavy operations, global branches.

Together, these create not just speed, but responsiveness — and that’s what modern operations rely on.

Case in Point: When the Cloud Becomes the Bottleneck

A global travel platform (Kiwi.com) found that its cloud-to-cloud traffic between AWS and Google created unstable latency during peak hours. By deploying Megaport Cloud Router, it eliminated unnecessary internet hops and stabilized performance — all without adding bandwidth. For mid-sized firms using Microsoft Azure, Google Cloud, or AWS, the same principle applies: routing efficiency often matters more than raw speed.

Latency Benchmarks: What’s Acceptable and What’s Costly

Application Type	Acceptable Latency (ms)	Performance Impact Above This Threshold
Local LAN Traffic	1–5 ms	Users notice lag in VoIP or file transfers beyond 10 ms.
Cloud Applications (ERP, CRM, SaaS)	50–100 ms	Above 100 ms, page load and transactions slow, reducing productivity.
Video Conferencing / VoIP	< 150 ms	Above 200 ms causes noticeable voice delay and user frustration.
Manufacturing Control Systems / IoT	< 10 ms	Even 20–30 ms can impact synchronization or cause system drift.
Financial Trading Systems	< 1 ms (ultra-low-latency networks)	Every millisecond equals measurable lost opportunity.
Cross-Region Cloud or VPN Connections	< 200 ms	Above 250 ms can significantly degrade user experience.

Rule of thumb:

• Anything above 100 ms is noticeable in most business apps.

• Anything above 250 ms is unacceptable for real-time workloads.

  
  

Latency doesn’t just “feel slow” — it compounds: a 100 ms delay in one system multiplied across 10 workflows per user per day can add up to hours of lost operational time each week.

How to Find Your Own Latency (and What It’s Really Costing You)

Knowing your latency isn’t complicated, but interpreting it correctly takes a little context.

Step 1: Measure It

You can measure latency in seconds using simple tools:

• Ping or Traceroute (built into every OS) — Test delay between your site and key destinations (ERP, cloud apps, vendor portals).

• Speedtest.net or CloudPing.info — Show average latency to cloud providers like AWS or Azure.

• Network Monitoring Tools (e.g., Auvik, Obkio, Fortinet FortiMonitor) — Offer continuous latency tracking and trend reporting.

• From your MSP — Ask your provider for historical latency logs; they likely already collect them.

Tip: Don’t just test once. Measure during peak hours, across different sites, and to critical services (like your ERP or WMS).

Step 2: Quantify the Cost

Latency becomes expensive when multiplied across time, users, and transactions. Here’s a simple framework to estimate its financial impact:

Latency Cost Formula:

(Average latency delay in seconds) × (Number of transactions per day) × (Cost per transaction minute)

Example:

If your ERP transactions are delayed by 0.1 seconds (100 ms), and your team processes 10,000 scans per day:

0.1s × 10,000 = 1,000 seconds = 16.6 minutes/day

At a conservative $40/hr loaded labor rate, that’s $11/day per process, or nearly $4,000/year in pure lost time — per site.

Now multiply that across multiple systems (ERP, WMS, CRM, etc.) and across shifts or sites — and it’s easy to see how latency quietly becomes a six-figure cost.

Step 3: Benchmark & Prioritize

Once you know where latency lives:

1. Compare your numbers to the benchmarks above.

2. Prioritize the biggest offenders (often cloud-hosted systems or inter-site VPNs).

3. Target improvement with design, not speed — SD-WAN, edge caching, and optimized routing often deliver better ROI than more bandwidth.

   
   

The FTT Perspective: Translating Milliseconds Into Metrics

At FTT Networks, we’ve seen latency creep into operations everywhere — not as a visible outage, but as a slow leak in performance. It’s the warehouse handhelds that lag by two seconds. The remote site that syncs overnight instead of in real time. The ERP that “feels slow” every Friday afternoon.

Our approach is simple:

• Measure end-to-end latency — from devices to the cloud.

• Redesign the network architecture (SD-WAN, edge, redundancy).

• Benchmark performance and tie improvements to operational KPIs.

  
  

Because latency isn’t an IT problem — it’s a business problem.

Key Takeaway

Milliseconds don’t just measure speed — they measure money. The question isn’t whether latency costs you, but how much.

FTT helps organizations see what’s hiding in those milliseconds — and reclaim the performance they’ve already paid for.