The cost of unexpected, computer-system downtime

Every day, someone’s computer cannot connect to something that they need to do their job; we call this downtime, usually caused by an outage, and it can impact a group of people within an organization, often at the least convenient of times.

CA Technologies surveyed 200 companies in 2011 and estimated that over $26.5 billion is lost each year in downtime; small organizations lost $55,000 (on average) each outage.  (Please see InformationWeek’s: “IT Downtime Costs $26.5 Billion in Lost Revenue”.)

Not only that, outages tend to be lengthy (hours or days) and can damage an organization’s reputation.  Plus, some industries (i.e.: manufacturing and financial services) can suffer a high rate of revenue loss.

Some components of downtime with significant value include:

  • Reduction in employee productivity
  • Revenue/opportunity loss
  • Penalties assessed

Reduction in employee productivity

If you assume that employees are unable to do anything during a computer outage, it is not too hard to measure the cost:  Number of employees impacted by the outage multiplied by the average cost/hour per employee.  So, 100 employees making at an average of $40/hour (pay, benefits, and taxes) would be 100 employees * $40 average cost per hour = $4,000/hour.

However, most employees can find something productive to do during an outage:

  • Schedule impromptu meetings
  • Review printed materials
  • Cleanup their work areas

Not exactly what their managers might want, but some productivity occurs during an outage, so you might want to add-in a productivity factor.  For example:  If you assume that employees are still 25% productive during an outage (meaning they are 75% unproductive), you can recalculate the cost per hour thus:  75% * 100 employees * $40 average cost per hour = $3,000/hour.

Revenue/opportunity loss

Revenue loss can sometimes be easy to quantify; a computer numerical control (CNC) machine tool waiting on the input of a computer-aided design (CAD) diagram or a computer-aided manufacturing (CAM) program can cost hundreds to thousands of dollars per hour in lost revenue if the CNC machine cannot access these items.

Opportunities lost are a bit tougher to quantify, but here are two examples:

  • You are a supplier to a large organization that has an online bidding process; you lose Internet access while the bid process is ending, but before you submitted a bid, resulting in a lost potential sale to your largest customer.
  • Your online store is unavailable during an outage, resulting in customers unable to buy from you and going to your competitors.

Penalties assessed

Outages can put health at risk (i.e.: medical services) or can lead to missed deadlines (i.e.: overnight delivery); these situations can result in penalties assessed to your organization by a government agency or by the customer.