Calculating Your Downtime Costs

Calculating Your Downtime Costs

In the IT world, downtime refers to anytime that your servers are not up and running. On average, downtime can cost a company roughly $5,600 a minute! That’s $300,000 an hour. Five things that can cause network downtime are power outages, network failures, hurricanes/floods, outdated software and hardware, and human error. No matter what causes it, downtime is going to cost you.

Determining Cost

If you need to determine the cost of downtime, you can use the following formula:

Cost of Downtime (per hour) = Lost Revenue + Lost Productivity + Recovery Costs + Intangible Costs

Lost Revenue

Revenue is the amount of money you make. You need to determine your hourly revenue and then multiply it by 40 to get the revenue for the week. Next, you must figure out what your uptime percentage is. This is the percentage of time your site is operational online.

Once you have those two figures, you multiply (Revenue/hour X downtime (in hours) X uptime percentage). That will give you your lost revenue.

Lost Productivity

When the network is down, salaried employees are still being paid. To determine the cost of productivity lost, you start by calculating each employee’s salary/hour. Once you have that, you need to estimate what percentage of productivity is dependent on the network being up. This is known as utilization percentage and may vary by employee.

Finally, to determine the cost of lost productivity, you fill in this equation:

Employee Salary/hour x Utilization % x Number of employees (with same Utilization %)

Recovery Costs

Recovery costs refer to any costs that accrue while you are fixing the downtime issue. Some examples of this are:

• Services to repair hardware
• Cost of replacing parts
• Costs due to loss of data
• Lost data recovery

While these costs may be more intangible than revenue or productivity costs, they are still essential to determining your downtime costs.

Intangible Costs

When your network is down and people can’t access your site, it can lead to some negative long-term effects. If you develop a bad reputation because your site is frequently down, people are less likely to visit your site, which means your revenue will go down. This is especially true if you work in e-commerce, and most of your revenue comes from online sales.

Prevention

There are several low-budget ways you can work to prevent network downtime.

Code Checks

When an employee is writing code, it’s not uncommon for mistakes to be made. If you have multiple employees checking over the code, it is significantly less likely that an error will be missed. This is common practice, and it should be applied to any changes that are happening to the network as well.

Monitoring

Employees should be regularly monitoring the network to make sure no issues are developing. If you must make a change to the network, extra vigilance should be given to ensure that nothing happens because of the change.

Simplicity

Try to keep changes as simple as possible. If you make many changes and then something goes wrong, it will be challenging to trace the issue back to the change that caused it.

Make Room for Errors

Errors happen, and if your team plans ahead for possible errors that could occur, it will be much easier to address them if they do.

Communicate

Anyone that will be impacted by any changes made to the network need to be alerted ahead of time, so they can look out for any abnormalities that pop up.

At Virtual IT, we want to help with your technology needs. Contact us today for more information.