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Calculating the Cost of IT Downtime
2:00pm
30th June 2016
www.databarracks.com | 2www.databarracks.com | 2
INTRO & AGENDA
Duration: 30 mins
(including Q&A)
Type questions on
the right
• The Simple Cost of IT Downtime calculation
• The cost of downtime for individual departments
• The cost of downtime for specific systems
• The longest outage you can suffer without cost
• Quantifying the ‘intangible’ costs
*Slides will be available and sent out following this session
Download “The cost of IT downtime calculator”
Q
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HOW MUCH DOES IT DOWNTIME ACTUALLY COST?
$740,357
(up from $505,502 in 2010)
2016 Cost of Data Center Outages
“downtime can cause business losses of up to £10,000 per hour and up to £1million if a full business day is lost…”
SRA report “Silver Linings: cloud computing, law firms and risk”
$5,600 per minute or $300K per hour
http://blogs.gartner.com/andrew-lerner/2014/07/16/the-cost-of-downtime/
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WHY IS THE COST OF DOWNTIME INCREASING?
• Digital transformation
• IT increases automation and productivity
• Increased reliance on technology
• Increased expectation from customers, regulators, suppliers and partners
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SOME DEFINITIONS
• Systems are completely unusable (not just reduced
performance)
• Time – can use any unit. We will be using the hour
• Cost
– Staff costs
– Fines or penalties from regulators or suppliers
– Loss of revenue• Reputational damage
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CALCULATING A SIMPLE COST OF IT DOWNTIME
Very simple calculation:
TurnoverNumber of
hours in
the year
Loss of
revenue per
hour
Cost per working hour
TurnoverNumber of
working hours
in the year
Loss of
revenue per
working hour
Staff costs?
Cost of
staff
Cost of staff
per hour
Number of
working hours
in the year
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CALCULATING A SIMPLE COST OF IT DOWNTIME
Simple cost of downtime
Cost per
working hour
Loss of
revenue per
working hour
Cost of staff
per hour
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EXAMPLE 1 –LEGAL / PROFESSIONAL SERVICES FIRM
For a £10 million turnover legal or professional services firm:
Loss of revenue = £4,808 per hour
Staff costs: £3,606 per hour (based on total salary of £7,500,000)
Simple cost of IT Downtime: £8,414 per hour
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A MORE SPECIFIC COST OF IT DOWNTIME
We may want to be slightly more nuanced:
• Per team or department?
• Per site?
• Per IT system?
*For any of these distinctions we can work out costs by loss of income and the cost of staff
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CALCULATING COST OF IT DOWNTIME PER DEPARTMENT
Staff costs?
Revenue lost per department
Total salary
cost for
department
Departmental
staff cost per
hour
Number of
working hours
in the year
Proportion of
revenue
contributed by
department
Loss of
revenue per
working hour
Departmental
revenue lost
per hour
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EXAMPLE 2 –HR DEPT IN A £100M TURNOVER ENGINEERING COMPANY
A HR department in a £100 million turnover engineering company:
Departmental revenue lost = £0 per hour
Departmental staff cost per hour = £108 per hour (based on an HR team of 5 and a total salary costs of £225,000)
Total cost of IT Downtime for department: £108 per hour
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CALCULATING COST OF IT DOWNTIME PER SYSTEM
Cost of downtime per IT system:
Simple cost of
downtime per
hour
Productivity
reduction due to
system outage
Cost of downtime
per system, per
hour
Loss of revenue
per working hour
Productivity
reduction due to
system outage
Loss of revenue
per system, per
hour
Departmental
staff cost per
hour
Productivity
reduction due to
system outage
Staff cost per
system, per hour( )
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EXAMPLE 3a –LOSS OF VOIP & EMAIL FOR £250m CHARITY
Loss of revenue = £28,538 per hour
Staff costs: £4,807 per hour (based on salary costs of 40% of expenditure)
Simple cost of downtime per hour = £33,346 per hour
Productivity reduction due to system outage (%) = 20%
Cost of downtime per systems per hour = £6,669
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EXAMPLE 3b –LOSS OF FUNDRAISING SYSTEM FOR £250m CHARITY
Loss of revenue = £28,538 per hour
Staff costs: £4,807 per hour
(based on salary costs of 40% of expenditure)
Simple cost of downtime per hour = £33,346 per hour
Productivity reduction due to system outage (%) = 20% for Staff cost & 100% for Loss of revenue
Cost of downtime per system, per hour = £29,500 per hour
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PERIPHERAL COSTS
Peripheral costs
• Fines from regulators & suppliers
Quantifying the intangible
• Losing an average sized customer (small outage)
• Losing your largest customer (longer outage)
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EXTENDED DOWNTIME
1 day 1 week 2 weeks
Loss of
revenue
£38,450 £192,000 £384,000
Salary costs £28,850 £144,000 £288,000
Peripheral
costs
£100,000 £500,000
Total £67,300 £436,000 £1,172,000
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KEY FACTORS
•What proportion of your costs are
salary?
(10% - 75%)
•How seasonal is your demand?
•How many sales would be deferred –
not lost?
•What is your cost of regulatory penalties
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IF YOU REMEMBER NOTHING ELSE
1. The cost of IT downtime is increasing
2. IT downtime doesn’t necessarily cost anything
3. Quantify the supposed intangibles
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RESOURCES
http://blogs.gartner.com/andrew-lerner/2014/07/16/the-cost-of-downtime/
http://www.ponemon.org/library/2016-cost-of-data-center-outages
http://www.sra.org.uk/documents/solicitors/freedom-in-practice/cloud-computing-law-firms-risk.pdf
• The Business Continuity Podcast
– http://www.thebcpcast.com/
• The Cost of Downtime Calculator
– Click here
QUESTIONS?
