According to Spot Migration, the average business suffers from about 14 hours of IT downtime per year. Regardless of whether you experienced more or less, I’m positive that there was a negative financial impact associated with each downtime event.
According to a survey by CA Technologies, small enterprises lost, on average, more than $55,000 in revenue due to IT failures each year, while midsize companies lost more than $91,000 and large companies lost more than $1,000,000.
Those numbers may shock you, but let’s think this through. How much are you paying idle employees? Did you pay overtime to make up for lost productivity? How much revenue did you lose that could have been generated? Did you incur late delivery surcharges? Did a loss of customer goodwill erode your ongoing revenue stream? Did you need to plan and execute campaigns to explain and apologize for the outage?
Costs incurred from network downtime. Here’s a complete list to help you work through what downtime costs your business:
⇒ All internal business processes will cease; inventory tracking/ERP, billing, HR, intranet, etc.
⇒ Lost sales revenue; sales will have no access to customer or product data
⇒ Lost employee productivity; no systems to keep them working
⇒ No communication; no email
⇒ The cost to restore IT systems
⇒ Materials lost/disposal and cleanup costs
⇒ The financial impact of customer dissatisfaction
⇒ Contract penalties
⇒ Compliance violations, if applicable
⇒ Upstream and downstream supply-chain ripple effects
⇒ IT and employee recovery costs
⇒ Potential litigation/loss of stock value
⇒ Missed deadlines that result in employee overtime
⇒ Priority shipping charges
How to calculate the average labour cost of a downtime event:
LABOR COST = P x E x R x H
P = number of people affected
E = average percentage they are affected
R = average employee cost per hour
H = number of hours of outage
How to calculate potential revenue losses during a downtime event
It is difficult to calculate this, especially the more intangible costs like customer dissatisfaction and loyalty. To keep things simple, we suggest the following calculation:
LOST REVENUE = (GR/TH) x I x H
GR = gross yearly revenue
TH = total yearly business hours
I = percentage impact (A high percentage would mean you can’t complete any transactions, will lose clients, and have a PR nightmare)
H = number of hours of outage
Finally, to calculate the expected annual cost, multiply this number by the number of expected annual hours of outage.
Business Continuity Price vs. Downtime Cost
Despite the fact that business downtime events are becoming more and more expensive, over half of businesses still don’t have a disaster and recovery plan. Many put it off until a downtime event occurs, which tends to be more costly than investing in a solution now.
We’re all guilty of procrastinating, but now that you know what a downtime event costs your business, you should use it as a benchmark against what it would cost you to invest in business continuity solution. The price range is vast, but to give you an example, our business continuity solution starts at $180/month for our most basic Alto line (and that includes a physical device that sits in your office). It does both onsite back-ups, as well as offsite backup (aka cloud). If one of your critical servers crashes, it would take about an hour or two for you to get back up and running. The price increases based on the amount of critical business data you need to be backed up.
Now if your business cannot afford any downtime, there are business continuity solutions that can keep your downtime to minutes, even in a disaster event. For example, with our higher-end line, you can boot-up a critical server that just crashed online in minutes and gets back to business. From there, you have 30 days to procure a new server (seriously, it can act as your server for 30 days). Obviously, this line costs more, but if your business starts to quickly haemorrhage money during a downtime event, it is a wise investment. If you were to get our higher end Siri’s business continuity solution, it ranges from $258/month to $2,898/month and does not include hardware. The price of the device ranges from $1,575-$23,099.