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• The Real Cost of Downtime
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The True Cost of Downtime

How much do you lose from unexpected downtime of your servers & business applications?

Losses in the areas of labor, revenue, and service all contribute to the total cost of an outage. A good starting point for evaluating these factors is to collect statistics on both the duration and associated costs of past outages as recorded by your accounting team.

Use the following equation to calculate the average labor cost of an outage:
LABOR COST = P x E x R x H
Where:
P = number of people affected
E = average percentage they are affected
R = average employee cost per hour
H = number of hours of outage

As companies depend more and more on computer applications for day-to-day business operations, the cost of downtime has increased.

The simplest way to calculate potential revenue losses during an outage is with the equation:
LOST REVENUE = (GR x TH) x I x H
Where:
GR = gross yearly revenue
TH = total yearly business hours
I = percentage impact
H = number of hours of outage
Service costs are rarely zero.

This category covers some of the more intangible outage costs. Did you incur late delivery surcharges? Did you pay overtime to make up for lost productivity? Did missing a critical financial filing deadline result in penalties and an adverse affect on your stock price? 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?

Downtime usually leads to a cascade of related costs. Work with your financial team to identify all such service costs incurred during or after a previous outage. Then, divide the total of these costs by the total number of hours the systems were down to determine the cost per hour.

Totaling all of the above costs gives a reasonable forecast of the loss you can expect to incur from an hour of outage for a particular system. (Costs will vary depending on the nature of the application, so you must perform this calculation for each system.)

To calculate the expected annual cost, multiply this number by the number of expected annual hours of outage.

When considering all factors, the potential loss from critical system failure may be a shock the first time you calculate it.