Working out the real cost of IT downtime for law firms
Downtime is bad, that much we all know. Working out exactly how much it can cost your firm – and actually putting a figure on it - is more difficult.
In the SRA's Silver Linings' report, they say that downtime can cause losses of up to £10,000 per hour, or up to £1million if a full day is lost. It's a particularly large estimate because it represents the entire sector (firms big and small) – your firm's actual costs may be significantly lower.
It's obviously far more useful to calculate your own figure relative to your size. So how do we do that?
The cost of IT downtime is increasing
Firstly, it's worth noting the massive digitisation of business in the last 20 years. In professional services in particular, technology is involved in almost every business process.
This pervasiveness can lead people to regard IT as merely a cost centre. It doesn't last long, of course, once they remember the joys of manual dictation, hand writing and filing.
Technology, when done right, is a business enabler – it lets you automate tasks and makes your business more efficient. However, that also means IT downtime now affects more departments and business functions that ever before. It also means your clients – now used to the increased productivity that IT enables – have raised their expectations. You need to recover as quickly as possible to meet them.
Working out the cost of downtime
The easiest way to get a figure for an hour of downtime is to take your annual turnover and divide it by the number of hours in the year (8760). Simple enough, no?
Well, sort of. 3 hours of downtime in the middle of the night on a Saturday doesn't have the same impact as 3 hours of downtime in the middle of the working week. So you can instead calculate the cost of downtime per working hour, which is your turnover divided by the number of working hours in the year (2,080).
Your other major cost is probably staff. Again, this is a simple calculation: just take the cost of your staff and divide it by the number of hours in the working year.
Obviously these calculations are a bit of a blunt instrument and you might want to refine them slightly to be even more specific. You could work out downtime costs per fee-earner for example, or per senior partner or IT system.
One of the key reasons anyone works out their cost of downtime is so you know how much is reasonable to spend to prevent it. When you look at these costs in different ways, what you might find is that really, you only need to spend money on one key IT system or a particular set of users.
Making intangible costs tangible
So what about the peripheral costs? These can be direct costs, such as regulatory fines, or more intangible, like reputational damage.
Realistically, fines administered will be in proportion to the kind of downtime you suffered, and how badly your customers were affected. If you have an outage for 3 days and are fortunate to have few issues with your clients, fines are likely to be far less damaging than if you have lost case-data or if you suffered an outage at a sensitive time.
It probably isn't worth including a regulatory penalty in your hourly cost of downtime, but you should definitely be factoring it in to calculations for long periods of downtime.
This is also what we suggest for those other "intangible" costs. If you have an hour of downtime, the damage to your reputation is probably negligible. If you're down for a week, there will definitely be an effect.
The best way to deal with intangible costs is to make them tangible. Do this by working out how much it would cost to lose an average customer (small outage) and then work out the cost of losing your biggest customer (big outage).
So, what will it cost you?
We could use the figures from the SRA as an example but, realistically, £1m losses for a day of downtime is only applicable to the biggest firms. So we'll use an example of a £10 million turnover firm.
Using our calculations from above, an hour of downtime for a £10m firm would cost them £8,414. Actually not too far away from the SRA figure of £10,000.
That works out at employee costs of just over £3,500 per hour and a loss of revenue of nearly £5,000. The cost for an entire day is about £67,300. That one is quite a way off the SRA figure of £1m.
We start adding in peripheral costs after one week of downtime and then serious peripheral costs after two weeks of downtime.
Last year in our annual Data Health Check, we asked IT managers from professional services firms how quickly they would like to recover in a disaster. 45% said they would like to do so in less than 1 hour but only 21% are able to do so.
And so that's what we do for firms. We provide IT disaster recovery so you can minimise that disruption and eliminate the chance of those extended periods of disruption.
Calculate your cost of IT downtime using our Cost of IT Downtime Calculator here.