A study of UK-based companies claims that mid-sized and large enterprises lose on average £500,000 a year due to application performance problems, while one in ten loses around £2 million a year.

The losses were attributed mainly to reduced productivity, lost sales, and lower customer confidence.

The survey was carried out by research company Vanson Bourne, which polled 100 organisations each with 1,000 or more staff. It found that the problem was greatest in the financial services sector, where 40 percent of respondents reported annual losses of £1 million or more from application problems.

Many of the losses are down to network issues, claimed Mike Bailey, the UK country manager with Ipanema Technologies, the WAN optimisation specialist which commissioned the study. He said that these include difficulties with running applications over a WAN, plus network downtime, jitter, packet loss, and the visibility - or rather, the lack of visibility - of network traffic.

The study also revealed that the favoured way of addressing slow application performance over the WAN is to increase the available bandwidth, even though all the evidence shows that this probably won't fix the problem. More than half the businesses polled said they had resorted to bandwidth upgrades, but 75 percent complained that it rarely improved their application performance.

"It's astounding that businesses are losing so much money due to application performance issues and still just throwing bandwidth at the problem, even though they know it doesn't fix it," Bailey said. "Simply continuing to increase bandwidth is neither a cost-effective nor forward-thinking way of coping with the pressure of more traffic."

He said that the real problem is that many organisations can neither measure nor control their WAN traffic. As a result, many businesses cannot offer their network users application-based service level agreements (SLAs), while two-thirds of those surveyed said they could not dynamically respond to changes in demand, for example by reallocating bandwidth between applications.

"Businesses need to have visibility of the network and the ability to react in real-time, managing traffic in response to changes in the network environment and demand from users," Bailey said.

He added, "It really is time they took a more strategic approach, managing network performance in a way that highlights what's going on and enables adjustment and improvement to be made, so costs are kept down and performance of critical applications can be guaranteed, even in times of congestion."