IT for Small Business: Calculating The Cost of Downtime

One of the biggest factors that businesses think least about is downtime – especially if they rely heavily on their technology.

It’s worth taking few minutes to ponder the question: “What is worth to have your business stop, because of a computer or systems failure?” Let’s take a quick look at what it can mean when your technology fails and the dreaded “downtime” appears.

Some Facts

If one person’s PC stops working, then it’s usually pretty straightforward to calculate the cost of down time. However if a whole company network stops working, the price can rise dramatically. A Gartner Group report estimates the cost of a network outage for a large business at $42,000 per hour.

A separate study from Pepperdine University shows that the cost of lost data can by itself be significant enough to cause concern. The cost can run to nearly $4,000 per data loss. Here are some more facts:

– 80% of all data is held on PCs (Source, IDC)
– 70% of companies go out of business after a major data loss (Source, DTI)
– 32% of data loss is due to user error (Source, Gartner Group)
– 10% of laptops are stolen annually (Source, Gartner Group)
– 15% of laptops suffer hardware failure annually (Source, Gartner Group)

Calculating the True Cost of Downtime

Technology repair costs aren’t just the hard costs of fixing the problem (i.e. hourly labour), there are dozens of variables that fit into the equation too. Your network problem that takes three hours to fix and costs you $300 in repair labour may actually have cost you close to $1,000 for those three hours by the time you factor in the hidden costs. Here are some of the hidden costs  / variables to consider when calculating the true cost of downtime:

  • Productivity reduction in $ (usually calculated by determining employees wage as a % of lost time due to downtime over the given time period)
  • Total cost of staff effected (calculated by determining how many people the outage effects X their productivity reduction)
  • Cost of negative impact to customers / clients (a little harder to put a tangible value on this, however, don’t fool yourself – this is a factor).

Avoiding Downtime

The bottom line is that in business, you simply can’t afford unscheduled downtime. With outages there are variables that effect not just the bottom line dollars, but also customer impact. How frustrating is it to call somewhere and they can’t help you because their computers are down!

So how do you protect yourself? Managed Services is one way. Service level agreements are another way. No matter what though, business and IT leaders should do the math, and find a way to keep their technology in check.