What’s Downtime Really Costing You?

If you want to understand the importance of maintaining a consistent and reliable network, all you have to do is look at your bottom line. When we work with clients on I.T. budgets, the most commonly ignored parameter is the cost of downtime – the impact that a failed system has on your business. Some amount of downtime each year is an expected part of I.T. operations anywhere outside of the most advanced data centers, but excessive downtime can be a drain on your resources. Continuing to run that out-of-warranty server in production or forcing your users to operate on substandard hardware may look like a cost savings on paper, but once the larger implications of an outage on revenue are considered you may feel differently.
There are many different ways to calculate the cost of downtime, and much of the calculation is simply speculative or an estimate based on previous experiences. Regardless, it is an excellent exercise to walk through so you can start to quantify the potential impact of a significant business disruption (SBD) in dollars and cents.

Lost Employee Productivity

Employee productivity can be measured by looking at the revenue per hour of each employee. Taking your overall company revenue, dividing it by the number of employees, and dividing again by the number of working hours in a year (2,000 is typical if you have 40 hour work weeks and 2 weeks of vacation a year) gives you a very simple hourly figure for revenue per employee. To be more accurate, you may want to assign a weight to certain employees – your sales team may be more critical from a revenue standpoint than some other employees.
There is a finite number of days in your fiscal year – imagine how much more money you could make if your business magically received an extra week of productivity from every employee! Now consider how catastrophic it actually is to the production of your goods or services when you lose a week of work. A commonly cited number is $12,500 per day for the average small business.

Lost Sales Opportunities

When a potential customer calls or sends you an e-mail, how long do you estimate they are willing to wait for a response before trying another business? If a system outage is affecting your ability to service new or existing customers in a competitive industry, they are unlikely to patiently wait for restoration. For businesses that deal in a small number high revenue, long sales cycle deals each year (such as Real Estate and Construction), missing the communication from a potential new customer can be a huge financial setback.

Lost Customers & Damaged Reputation

Bad publicity costs are very difficult (if not impossible) to calculate. Even if you are still able to provide the normal level of service to clients during an outage, there can be a significant cost to your reputation. Issues like bounced e-mails, constant delays from virus infections, and lost sales orders look unprofessional. The end result is that some clients may leave and new clients may avoid your business under the assumption that these I.T. issues are indicative of how the rest of your business operates (specifically the parts that deliver your product).

System Restoration Costs

Finally, the actual price you pay for services and hardware to restore the data needs to be factored in. This is not limited to the cost you pay to outside providers, but also the cost you incur for internal labor to recreate data if the event caused a data loss. Employees working overtime or wasting normal work hours redoing their work is bad for moral as well as the bottom line.
Understanding how downtime affects your business is critical when evaluating the total cost of ownership for your I.T. systems. Factoring this in to your decision making process during upgrades and refreshes will help ensure your employees stay productive and your customers stay happy.

Comments