Assessing the Financial Impact of Downtime

High Availability / Disaster Recovery
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Understand the factors that contribute to the cost of downtime and accurately calculate the impact to your organization's bottom line.

 

Editor's Note: This article introduces the white paper "Assessing the Financial Impact of Downtime" available free from the MC White Paper Center.

 

With the ever-increasing reliance of businesses upon their IT systems and electronically stored business data comes an equivalent increase in management's duty to ensure due diligence and fiduciary responsibility with respect to protecting them against all causes of loss or damage. The potential costs of failing to do so can be enormous.

 

This article provides an introduction to the associated white paper that addresses the assessment of threats to your IT operations, inclusive of systems, applications, and data. The paper in its entirety actually will guide you through how to develop solid numbers around the potential costs that those threats represent.

Hidden Financial Risks

According to Dunn & Bradstreet, 59 percent of Fortune 500 companies experience a minimum of 1.6 hours of downtime per week. To put this in perspective, assume that an average Fortune 500 company has 10,000 employees who are paid an average of $56 per hour, including benefits ($40 per hour salary plus $16 per hour in benefits). Just the labor component of downtime costs for such a company would be $896,000 weekly. This translates into more than $46 million per year.

 

Of course, this assumes that everyone in the company would be forced to stop all work in a downtime scenario, and that may not be so. But, since the operations of many companies are increasingly knit together by their information technology, system downtime now hampers the productivity of almost everyone in the organization and completely sidelines a significant and growing percentage of them.

 

While some insurance providers offer coverage to reimburse companies for sales revenue lost during unplanned server outages, typically, these policies do not cover any other expense besides lost sales. Facilities Management operations often hold these types of policies to lessen their exposure.

 

Before you can calculate downtime costs, you need to know its sources. And not all of them are strict IT issues. To begin with, it is important that you identify and understand both your internal and external downtime threats. What has the potential to take your business down? The threats to your business could include natural events as well as man-made events, "weather and wires."

 

Spend time thinking about what could actually happen and plan accordingly. There could be accidental as well as planned events that could cause or contribute to systems and business downtime. Some events may be within your control while others are not. Some events, like hurricanes, will give you ample warning; some events, like a server power supply burnout or RAID controller crash, may happen quickly and give you very little time to react. Sadly, you'll also need to consider extreme external events, including terrorism, or regional disasters, such as wide-spread power failures or the collapse of a key bridge in a metro area. Such events can impact employee availability and safety, power, and data line availability.

 

Want to read the entire article? Download the complete white paper "Assessing the Financial Impact of Downtime" for free from the MC White Paper Center.

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