Save $$$ By Planning Your Business Disaster Recovery
Written by Guest Author: Edmundo Moreno
Downtime Is More Expensive Than You Realize
Whether your headquarters location is hit by extremely bad weather, or your systems are locked by a cyberattack, downtime in all of its forms can be incredibly harmful to the revenue and reputation of a business. Downtime costs a lot. Statistically speaking it is the second-largest expense after HR. According to Information Technology Industry Council (ITIC), as of August 2016, 81% of organizations report that downtime costs them on average over $300,000 per hour.
Calculating Downtime Costs
Though there are statistical averages for how much downtime can cost organizations, the numbers vary greatly from business to business. Consider that the cost of downtime per minute can range from $137 to $17,244. If your business is larger or smaller than the “average” you may see higher or lower costs of downtime in your company. Your company’s industry will also determine where your revenues come from, which will alter numbers as well. However, there are methods of determining how much downtime will cost your company per hour if a disastrous situation does arise.
Check out the following formula from Data Foundry to determine your productivity cost:
Productivity cost = E x % x C x H where E is the number of employees affected, % is the percentage they are affected or how much of their productivity depends on uptime, C is the average cost of employees per hour, and H is the number of downtime hours.
First, determine which specific areas of your business generates revenue. Next, calculate how much you make per hour from these areas. You also must estimate how important uptime is to generate this revenue. If for example, your business is an online clothing retailer, 100% of your revenue comes from uptime. After determining how much revenue is made during uptime, calculate how much revenue per hour is lost during downtime. If your eCommerce business also has physical stores and you’ve determined 50% of your revenue is generated in uptime online, then multiply that percentage by your total revenue in dollars for that area. When you add the figures of revenue lost per money-generating area, you’ll have your total cost of downtime per hour.
Depending on how much of your business relies on your working tech, you could be looking at thousands of lost revenues for even just a few minutes of downtime.
Indirect costs are tied to revenue but aren’t as easy to measure with concrete figures. However, they can be more crippling than the loss of revenue itself. Indirect costs add up quickly and can prevent a lot of downstream work from getting done. They can even send your company on a downward spiral. Here are the biggest indirect costs to consider:
- Loss of reputation. If systems go down at the wrong time, you can’t meet your commitments. This can lead you to lose clients you have, and can even prevent you from finding new ones.
- Loss of opportunity. What did you miss while you were down? Did a big potential client try to visit your website but couldn’t access it? Will they come back to you or did they already make a deal with a competitor? Did a huge deal fall through because your cloud platform broke during a key presentation? These are just a few problems downtime causes.
- Re-doing work. Downtime is often coupled with data loss. If data loss causes work to disappear, someone often must do that work again, which slows your business down and costs you opportunities and workforce hours.
It’s easy to see how a few hours of downtime can cause thousands of dollars in loss, and how that cost coupled with indirect costs can put a business in the ground. Backup and disaster recovery solutions that prevent downtime pay for themselves quickly. Investing in these tools is less a costly burden and more a form of insurance. Make sure your business stays sturdy for years to come by taking the time to evaluate these costs and how much you can invest in downtime prevention.