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Understanding the High Cost of Downtime

 

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Most businesses today depend upon the availability of their computer systems — and that dependence creates tremendous risk. Downtime can and will occur, whether caused by weather-related disaster, power interruption, fire, water damage or human error. The cost and disruption to operations can be devastating.

 

According to a recent study by the Ponemon Institute, unplanned outages in U.S. data centers cost large organizations just over $7,900 per minute on average in 2013, up 41 percent from 2010. The average incident lasted 86 minutes, resulting in an average cost per incident of roughly $690,000. Those numbers were calculated from an analysis of 67 U.S. data centers with a minimum size of 2,500 square feet.

 

Understandably, those figures are a little hard for small business owners to fathom. If you have just a handful of servers and a couple dozen PCs, unplanned downtime isn’t going to be anywhere near that expensive. But the costs used to derive those figures apply to businesses of any size, and put into perspective what downtime can mean to your business.

Recovery costs. This is the cost of the hardware, software and services needed to recover your data and get your systems back up and running. This will vary depending upon the extent of the disruption, how often data is backed up, whether data is actually recoverable and a number of other factors. It’s important to recognize that these costs often go up in an emergency, and few businesses are prepared to take an unexpected “hit” totaling thousands of dollars.

Lost revenue. If your customers are unable to access your e-commerce site, or your employees cannot process orders because key systems are unavailable, you are losing revenue due to downtime. In order to calculate those costs, start by determining how much money you generate per hour in each revenue-generating area of your business. Then estimate what percentage of that revenue relies upon your computer systems. That gives you revenue lost per hour of downtime.

Lost productivity. If your employees are working to get your systems back online — or worse, sitting idle — they aren’t doing the productive work you’re paying them to do. To calculate the cost of lost productivity due to downtime, determine how much of each employee’s productive work is dependent upon your computer systems. Multiply that percentage by the employee’s hourly rate. Add up the costs for all your employees and you’ll have the lost productivity costs per hour of downtime.

Opportunity costs. These are the intangible consequences of downtime, including lost business opportunities, customer churn and damage to your reputation. Again, this will vary depending upon the extent of the outage, the demographics of your customers, and how reliant your business is upon technology. Keep in mind, however, that in today’s tech-savvy society, many customers take a dim view of downtime. An outage can have a long-term impact on future sales if not handled properly. The longer the outage, the greater the opportunity costs.

The final analysis. Once you have these four values estimated, add them up to get a sense of the total cost of downtime to your business. Odds are it won’t be $7,900 per minute, but the number is likely to be eye-opening. Keep these costs in mind as you consider investments in data backup and disaster recovery solutions.

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