The True Cost Of Downtime

Jean Thilmany

11/17/2009

All data center managers hear a lot of talk about uptime. But if you’re going to address uptime, you have to talk about its less welcome relative: downtime.

Let’s face it, virtually any data center downtime has some sort of financial cost to the enterprise, whether it’s in actual revenue dollars lost, loss of productivity, or employee downtime. It’s likely the financial cost comes from a combination of all three. And although it’s easy enough to find general figures that are meant to give enterprises a ballpark figure for how much their downtime costs the enterprise, in reality those numbers can vary greatly depending on the type of enterprise. General numbers aren’t good enough here.

The Calculation

Making a cost-of-downtime calculation specific to your own particular enterprise is beneficial for several reasons, says Richard Whitehead, director of solution marketing at software maker Novell (www.novell.com). By fixing downtime costs, IT managers can isolate problems within the data center that need improvement, determine the reason for the downtime, and fix the problems.

Also, when companies know their cost of downtime, they can make good business decisions about the redundancy methods and levels they should have in place, says Dave Murray, CEO of Convergence Networks (www.cnwi.net), an IT consultancy.

“Take, for example, a case where five minutes of downtime could cost a company $100,000 in revenues,” Murray says. “That enterprise can easily justify and make a decision to have a high level of redundancy to eliminate downtime.”

But getting to that quantifiable number—that five minutes equals $100,000—isn’t always easy or even possible, says Jason Abate, CEO of Panopta (www.panopta.com), which offers server monitoring and outage management.

“If any of the services you’re providing from your data center are critical to your business or your customer’s business, [downtime] eats into the effectiveness of your business,” he says.

The business efficiency may take many not-easily-quantifiable forms, such as to increase the hassle and delay for users accessing your server. A slowdown in Web applications might also mean employees or customers can’t get to the tools they need to get their jobs done, Abate adds. Employees without access to email, even momentarily, will lose an important communications medium.

Plugging In The Numbers

So how exactly does a data center or IT manager at a small to midsized enterprise go about calculating the costs of downtime for her particular enterprise?

The best method of calculating the cost of downtime is to compare a history of downtime for a particular period against loss in productivity or sales for that period, Murray says. But calculating loss in productivity and sales can be tricky, as so many variables—specific to each enterprise—go into the mix, he adds.

So cost calculations depend on the enterprise, he adds. Some enterprises can be accurate in calculating the cost of downtime, because they know all the variables.

Small enterprises without outside customers tapping into their servers may be in the best position here, Abate says. They’re better able to make hard-and-fast determinations such as, if the server goes down, 20 employees will lose access to email and other Web applications. Knowing those employees’ hourly wages will allow managers to come up with downtime costs per hour.

Larger, more complex enterprises that do have outside customers relying on IT services the enterprise offers will have a more difficult time making this kind of calculation, Whitehead says. Who’s to say how many customers might be lost when they’re unable to complete an online sale?

“For some businesses downtime in the middle of the night is not a big deal and may not even be noticed,” Whitehead says. “For a company—even a small company—that does online business or global business, the impact could be significant.”

Enterprises need to consider the impact of productivity, revenue, labor, and, in some cases, opportunity when assessing downtime costs, Whitehead says. “For example, if you’re running a promotion that happens at a specific time and your system is down or unable to accommodate all the users, you’ll see a business impact,” he says. Each cost to downtime will need to be considered, because no single factor gives you the total picture, he adds.

Also hard to quantify are the cost of very short outages, as these costs might add up over time, Abate says. For instance, an important email may be delayed, resulting in a lost sale.

Decision-Making Aid

With the cost of downtime in hand (even if the cost estimate is a rough one), IT managers will have the necessary information to make certain decisions, Abate says.

“Even if the numbers have some limitations, they can still help you decide what it is you want to do about the downtime,” he says. “It may be you decide it’s an acceptable cost, or you maybe decide to fix some things. The numbers sort of lay out what the impact of your downtime is and give you a way to consider your options as you decide what to address.”

Knowing the cost of downtime can provide IT with a clear reason to upgrade a system, hire more people, or make changes in the process, Whitehead says.

Keep in mind, he adds, that should you decide to address downtime issues by implementing new technology or by other means, you’ll need to calculate your costs of downtime again. But hopefully this time, you’ll be looking at how much money you’ve saved by decreasing downtime.

By: Jean Thilmany for .

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11/17/2009

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