Why you need to understand the cost of IT downtime

IT is great when it works. Your colleagues don't really notice it – everything just works as it should. Unfortunately, when something goes wrong, there's no hiding. Everyone knows, and they know straight away. Not just employees, but customers as well. Just ask TSB and Visa.

IT failure hits all of us at some point. There are a million and one different reasons this happens (check out the 2018 Data Health Check for a summary) and an outage can last from minutes to hours to days.

Definitions of downtime vary. In this instance, we define downtime in black and white terms; a system is unavailable. It doesn't factor in reduced performance – a system either works or it doesn't.

Depending on the kind of business you run, the cost of downtime can vary. For a company like Visa, with millions of customers carrying out billions of transactions worldwide, an hour long outage is a catastrophe.

So it's vital to have a plan that ensures your business will

a.) continue to function when disaster strikes, and
b.) recover from an IT disaster as fast as possible

A key part is understanding how much IT downtime could cost your business. What happens if a broker's phone lines go down for half a day? What if a factory floor suffers a power outage?

If you know the potential risks and associated costs, you can prepare to bounce back from disaster faster.

There are a number of ways to look at the costs that come with IT downtime. We use four views that we find are the most useful.

The simple cost of downtime

The quickest and easiest method gives you a rough estimate without much investigation.

The two contributing factors are:

Loss of revenue per working hour – When a disaster strikes is just as important as how i.e. the cost of an outage in an accountant's office on a Saturday afternoon, as opposed to in a shopping mall at the same time.

Cost of salaries per working hour - When staff can't access vital systems for long periods of time, they can't work effectively. The organisation is getting no value from its expenditure.

Combine these two figures for a simple cost of downtime.

Cost of downtime per department

Some departments that make revenue are reliant on IT. Others, like administrative departments, don't necessarily make revenue but keep the business running. It's important to figure out the cost of IT downtime for each department to helps you prioritise which department needs recovering first.

Cost of downtime per IT system

This helps you prioritise which systems are key to revenue and need recovering first. Understanding the cost of downtime per IT system helps you see costs in the context of how they affect productivity.

Peripheral costs

Downtime can result in reputational damage (again, ask TSB) causing a business to lose current and potential customers.

Missed business opportunities and being unable to close deals are unwanted potential side-effects.

There can also be legal/regulatory consequences, resulting in financial penalties.

Surprisingly, these issues often aren't front of mind until the worst happens. And then, among the chaos, it's hard to know what to do next, let alone know the ultimate cost when the dust settles. The first step to resilience is preparing for the worst. Although they're difficult to estimate, it's not impossible – and it's worth it.

Only when you know the potential costs can you decide how much to invest in your IT resilience.

Try this calculator to quickly get an understanding of the cost of your IT downtime: http://info.databarracks.com/Cost-of-Downtime-Calculator.html

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