Technology is not perfect (as much as we might like it to be). Despite all the advances, we still expect hardware to break, Internet to go down and software to become infected with viruses. When these events happen, they cost any business, no matter the size.
The data on downtime
CA Technologies conducted a survey of 200 companies across America and Europe to measure the cost of IT downtime.
- Roughly $26.5 billion in revenue is lost each year from IT downtime.
- The businesses surveyed said they suffered 14 hours of IT downtime per year.
- Half of the surveyed businesses said the outages affected their reputation.
- 18% described the impact on their reputation as “very damaging.”
- The average downtime across industries costs a company $5,600 per minute.
- The average reported incident length was 90 minutes, resulting in an average cost per incident of approximately $505,500.
- For a total data center outage, which had an average recovery time of 134 minutes, average costs were approximately $680,000.
- For a partial data center outage, which averaged 59 minutes in length, average costs were approximately $258,000.
- The report cited the highest cost of a single event at about $1 million (more than $11,000 per minute).
How does downtime affect my business?
Many people think of downtime effects as solely revenue-based: “If we are down, then we can’t sell product X.” While this may be true, it is not the only loss suffered. In fact, downtime can have far-reaching effects across many parts of your business that will affect your bottom line in ways you might not have anticipated. It’s important to remember how everything ties into the bigger picture. When starting to determine what downtime will cost you, remember to work through:
- Lost sales revenue
- Lost employee productivity due to malfunctioning systems or Internet (think in terms of salaries and benefits)
- Potential employee overtime costs to meet deadlines following a period of disruption
- IT recovery costs
- Cost of restoring IT systems (some data may be forever lost)
- Supply chain ripple effects
- Where applicable, compliance violations or materials lost
While this list is in no way exhaustive, it starts to show you just how devastating downtime can be. What’s more, there are other, more intangible effects to your business that may be harder to quantify with a dollar amount. These include:
- Customer dissatisfaction
- Low employee morale or turnover due to stress/consequences of downtime
- Brand/loyalty damage
How to calculate downtime loss
While calculating losses due to downtime can be complex, there is a widely accepted basic formula that should help you start to understand just how much your business might be impacted.
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.
Make sure you are prepared
Despite the potentially devastating consequences that downtime can have on small businesses, more than half of small businesses reportedly do not have a disaster recovery and business resumption plan. Waiting until a crisis actually occurs to fix your business’ lack of a plan isn’t advisable because by then, it may be too late. One of the most common reasons business owners cite for not having a plan is cost. Now that you can start to figure out what downtime will cost you in dollars, you can easily weigh this price tag against the cost of investing in solutions.
MyITpros offers a free disaster recovery/business resumption plan template to get you on the right road to preparedness. We encourage small-business owners to talk to local managed services partners who can help you determine what technology you need and help identify and fill gaps in your team and processes.
The goal of this blog is to answer the questions that you ask! For more information on business continuity and disaster recovery, check out some of our related blog posts. We encourage you to contact us with any questions about planning for your business or managed services!