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Article Calculating the Costs of Unexpected Downtime

By Insight UK / 7 Nov 2019 / Topics: Cloud

In today’s business environment, your IT infrastructure, along with the applications and services hosted on it, are vital to the success of your organisation. So, in the event of unexpected downtime, the impact on your business can be far reaching.

Equipment failures, unexpected power outage, human error, external events such as flood or fire along with cyber-attacks, can all cause unexpected downtime. Because reliable connectivity is fundamental to so many businesses functions, the impact of downtime can be huge.

Despite improvements and investments in technology, many companies still suffer network downtime which can lead to a loss of sales, the inability to provide service to customers, a huge decrease in productivity and a temporary loss of data. Although being aware of these impacts can be beneficial, it is useful for businesses to put a monetary value on downtime in order for them to be able to make informed decisions on how to mitigate it.

Online research will quickly bring up figures which relate to the cost of downtime with values of $5,600 per minute and $300,000 per day being frequently cited (www.gartner.com). However, there is a large degree of variance based on the characteristics of your business. Jeff Orr, Group Chairman of Stack Group, suggests that for small and medium sized business in the UK, a useful calculation to find the hourly cost of downtime is:

Example 1:

So, as an example, for a small company of 30 people, with an annual turnover of £3 million and a 50% profit margin, the hourly cost of downtime can be caluculated as:

Example 2:

For a mid-sized company of 100 people, which has an annual turnover of £10 million and a higher profit margin of 60%, the hourly cost of downtime can be calculated as:

Example 3:

Finally, for a much larger organisation, or regional hub of a multinational, with around 500 staff, annual turnover could be £50 million with a profit margin of 50%. In this case we would calculate:

As you can see, the examples above calculate an hourly cost. However it is also worth considering how much disruption a business will experience as a consequence of an unexpected event. Because each event is different in its nature, the amount of downtime you can expect to experience will also vary. Ransomware, for example, can cause between 1 – 5 days of downtime, whereas something like a power outage may only cause 3 hours of downtime. In contrast to this, external events may cause 14 days or more of downtime as the extent of the damage is likely to be vast.

Using our examples above we can look at the likely costs of downtime for different types of unexpected events.

By examining the expected costs of downtime in relation to each type of event, organisations are better placed to make informed decisions when planning to mitigate downtime. Applying an anticipated cost to downtime can strongly demonstrate a Return on Investment for many of the solutions which can be applied in order to combat the threat of downtime.

Learn more about the impacts of downtime with our Disaster Recovery Solutions