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TechnologyApr 20, 2016

The True Cost of Downtime

Shawn Anderson

Your organization will experience downtime at some point—it’s inevitable. These interruptions could impact a few users, a department, or the entire organization, including visible impact to your clients. Every minute an organization is not working there are productivity, financial, and reputational losses. An organization’s ability to quickly recover is directly related to their backup and business continuity solution.

Backup and business continuity go together and are a holistic solution to ensure the rapid recovery of your organization during a disaster scenario.

  • Backup – refers to the copying and archiving of data so it may be used to restore the original copy after a data loss event.

  • Business continuity – a defined set of plans, activities, and technologies, which are intended to ensure an organization’s critical business functions will continue to operate despite a disaster or interruption.

  • Interruption – an act or event that prevents the normal flow of operations within the organization.

Interruptions

Interruptions happen in two different forms: planned and unplanned.

Planned interruptions are known scheduled events. They are easier to handle as notifications and special arrangements can be made to minimize the impact to the organization or client. These events are often performed during off-business hours to further reduce impact. A few examples of planned interruptions include:

  • Server patching

  • Application upgrades

  • Database maintenance

  • Network upgrades/changes

Unplanned interruptions are a surprise event. These are the most challenging and dangerous, often happening without warning and usually during the worst possible time (Murphy’s law). Outages of this nature thrust IT into a reactionary mode, wasting precious minutes or even hours analyzing data and searching through log files trying to determine what’s happened and seeking resolution. A few examples of unplanned interruptions include:

  • Natural disasters

  • Human mistakes

  • Network failures

  • Hardware or software problems

Costs

Downtime can cost organizations anywhere from a few thousand dollars per minute to millions of dollars per hour.  Roughly 60% of organizations experience a service interruption each week, varying from a few minutes to several hours at a time. Many organizations look at a few minutes per week as acceptable—“It was an inconvenience, but we are back.”  Minutes add up, and over the course of a year you can quickly hit an hour or more in total downtime.

Let’s look at an organization that experiences a total of 15 minutes per quarter of downtime:

  • Annual company revenue: $118 million

  • Number of employees: 385

  • Average employee hours per week: 42.5

  • Average employee PTO per year: 120

  • Number of sales per year: 10,000

  • Estimated number of sales lost due to outage: 100

  • Total number of clients: 100,000

  • Total number of clients lost due to failure: 50

  • Total hours of system unavailability per year: 1

  • Percentage of staff unproductive during an outage: 25%

A company with revenue of $118 million per year that experiences only 15 minutes of downtime per quarter equals a yearly loss of $1.3 million. That’s a cost of $21,700 per minute. This does not include data re-entry, consulting services, nor reputation/trust damage with the clients. Reputation and trust are non-tangible objects that are very difficult to calculate in loss and are the hardest to recover from. Sometimes the effects are not realized for months or even years.

Next Steps

Unfortunately, it is not as simple as buying a product like a new server or software package. To achieve success, you must start at the beginning:

  • Have an in-depth understanding of critical business dependencies on technology.

  • Have a complete understanding of the risks associated with a service interruption.

  • Understand the true cost of a service interruption (downtime) per hour.

These three key areas will serve as the foundation and guiding principles during the design and implementation of the solution. Each of these areas directly impacts the processes, technology, and financial commitment necessary for the solution to be a success during a time of disaster.

Do you want to explore options to establish or improve your organization’s business continuity measures? Credera has extensive experience in designing, planning, and implementing business continuity solutions. If you have questions about this blog post, points of view, or IT infrastructure, please leave a comment below, e-mail us at sales@credera.com, or contact us online.