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Latency: the Hidden Cost to Your Business in 2022

Updated on
min reading

three fibre optic cables

What is latency and why does it matter to your business? There’s a good chance you’ve never even heard of network latency but it could be costing you a fortune. Basically, it’s all about internet connection speeds and productivity. Read on to find out what latency is, why it matters and what you can do about it.

What is latency?

computer servers

Network latency is the time it takes for information to travel between multiple devices that are all communicating with each other. Data packets carrying information are transmitted from routers to servers and back again. In a simple example, when you use your laptop to access a website, latency is the delay between making the request (‘please open this webpage using this url’) and the final processing of the request (the webpage opens).

Why is latency so important for business? Because you need to be able to deliver and receive data quickly. In other words, you’re sending lots of data packet requests repeatedly, whether it’s connecting to a server to process card payments or using Skype for remote meetings and phone calls.

In business, latency is just as important, if not more, than bandwidth because it’s the speed of information delivery that matters, not so much the amount of data being transferred.

Buffer sizeWhen there’s a delay in downloading a video or audio file you see the message ‘buffering’. This is often due to latency issues in your network connection. Since data needs to be broken down into manageable pieces in order for servers and devices to process it, buffers are used to store chunks of data, as if they are queuing up to reach their destination. If the buffers aren’t big enough the processing time slows right down

What’s the difference between bandwidth and latency?

The typical analogy to explain the difference between bandwidth and latency is the pipe metaphor. No, we’re not talking about Sherlock Holmes - imagine a pipe that carries water. Bandwidth is the equivalent of the maximum volume of water the pipe can carry and latency equates to the time it takes the water to travel the length of the pipe.

horizontal pipe with a laptop at the left hand end and a globe at the right hand end

What does this have to do with broadband internet speeds? Well, when an internet service provider (ISP) quotes average download speeds of 76 Mbps, this means that the connection is capable of delivering 76 megabits of data per second, i.e. the metaphorical pipe (or available bandwidth) is wide enough to carry 76 megabits of data.

When it comes to on-demand TV or video streaming, for example, bandwidth is more important than latency because you want your internet connection to be able to cope with large amounts of data (i.e. you need a wide pipe). In contrast, online gaming or VOIP calls (Voice Over Internet Protocol, or cloud-based telephony) require lots of small data requests travelling back and forth (i.e. fast movement back and forth in the pipe), therefore it’s latency that matters more to get that rapid throughput.


While internet speed is measured in megabits per second (Mbps), latency is measured in ping rates of milliseconds. The ideal situation when it comes to broadband speed is to have high bandwidth and low latency, since high bandwidth gives you fast download and upload speeds and low latency delivers data quickly. Latency with a ping rate faster than 100 ms is generally agreed to be very good. Click here for a latency test.


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How is latency costing my business money?

It’s worth highlighting just how far some companies are willing to go to improve latency. $1.5 billion dollars was spent in recent years laying fibre optic cables on the seabed with one specific goal in mind: to reduce latency between London and Tokyo.

laptop surrounded by piles of coins

Incredible as it may seem, cutting latency from around 230 ms to 170 ms is worth inordinate amounts of money to the stock market traders of Japan and the UK. Delays of just a few milliseconds can mean gaining or losing millions of dollars (remember we’re talking about the difference between the blink of an eye and a third of a blink of an eye!).

If latency can have that kind of impact, can it also have significant repercussions on smaller-scale businesses? In a word, yes! Your day-to-day business could be affected by high latency in many ways, such as the following:

  • Cloud-based EPOS systems: there are long delays when processing card payments through your electronic point of sale system.
  • Delays when making VOIP calls: you use a cloud-based telephone system and there is a time lag between people speaking and being heard by others on the call.
  • Videoconferences or remote meetings: your connection doesn’t keep up with the real-time conversation.
  • Complete packet loss between sender and receiver: the data simply does not arrive at its intended destination, e.g. your POS cannot connect to the server to process a payment or a Skype call gets cut off.
  • Your business website page speed: visitors browsing your website will leave quickly if the site takes too long to load.

These types of problems all lead to one thing: reduced productivity. And you don't need us to tell you about the direct impact that lower productivity has on net profit.

How to reduce latency

Here are our top tips for troubleshooting latency problems:

  • Reconsider the placement of your router: the physical distance between devices and routers can make a real difference.
  • If you’ve got a standard ADSL broadband contract, switch to fibre broadband. This often improves your download speed and network bandwidth too.
  • Keep your software and hardware up-to-date. For software, don’t ignore those update alerts. Set up software to download updates automatically if you can. For hardware, check everything is configured as it should be.
  • To speed up your business website: ask your web host about cache control configuration. You can configure various settings so that data responses are cached (copies are stored) instead of having to be sent on a round trip every time they are needed
  • Maximise bandwidth: get a leased line if you can afford it. This allows you to connect to the internet via your very own line, thus avoiding congestion caused by heavy network traffic from other users outside your organisation.

We can take steps to lower latency but it’s impossible to eliminate altogether. Even if data travels at the speed of light, there is still a ping rate of 0.00333 ms. That might not sound like much, but when you think about the distances involved for sending, receiving and processing data, every millisecond counts.

Latency and the Internet of Things

laptop surrounded by pie charts and bar graphs

More and more businesses are incorporating the Internet of Things (IoT) in their everyday operations and, of course, this means ever-greater demands are placed on business internet connections.

The IoT is the term used to describe the connection between internet-enabled everyday objects, such as smart watches, smart energy meters, and smart fridges that automatically tell you when you've run out of milk. High latency stops you taking full advantage of the IoT and all it has to offer.

Imagine you have smart devices operating on your business premises, perhaps a virtual assistant such as Amazon Alexa that activates and deactivates appliances according to certain rules. It could be something as simple as turning up or down the heating system based on the price of wholesale energy or automated checkouts where customers pay using their mobile phones.

With multiple devices connecting to your network to communicate with each other, if your latency is too high you could have bottleneck problems, which will cause breakdowns in data transfer between the devices and they simply won't work properly.

There could be any number of ways that devices in the IoT make decisions in your line of business. Whatever those decisions are, delays caused by high latency and other network performance issues could have serious consequences. As the IoT expands and more business applications migrate to the cloud, reducing latency will be paramount to optimise end to end data requests and responses.

Discover the truth about Internet of Things, 5G and UK businesses. Plus, find out how setting up guest wifi for your customers is a quick and easy way to boost your income.

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