Member Article

Do you really know what downtime could cost your business?

Garry Sheriff, Managing Director of tech experts ITPS, gives some practical advice on how to calculate the true cost of downtime to your business.

“We are all accustomed to having systems and data at our fingertips, 24/7. But when that situation changes, it’s not just an inconvenience, it can also cost your business thousands of pounds.

Business interruptions come in many forms, ranging from floods and fires to cyber attacks and even simple human error. It is not a case of if an incident will happen, but when.

Using our easy to use ‘cost of downtime’ calculator, we have helped hundreds of clients to measure the financial impact of a potential disaster. Every single one of them was surprised to find out how much downtime would really cost them.

These are our six tips for examining potential downtime costs.

Define what downtime means to you: is it a complete loss of all systems, or just business critical applications, or email going slow? All disasters are different, and bespoke to the business.

Consider the timing: if your payroll system fails in week one of the month, it can be less disastrous than if it happens in week four.

Basic cost of downtime: even while cashflow is interrupted, costs still mount up. Divide your annual revenue by the number of available working hours per year, then add salary costs per working hour to give you a basic cost of hourly downtime. If you are an ecommerce business operating 24/7 internationally, your costs might be higher than a traditional 9-5 operation.

Departmental cost: if you expand the basic cost and analyse by department or even by IT system, you can see a more detailed view. When you look at your departmental salary costs you need to add in total lost revenue because staff – costed at various levels of function and seniority – cannot do their jobs.

Systems cost: if your CRM fails for an hour your productivity might drop by 30%, while a telephony or mail server failure could see it drop by 40%. Factor in elements such an inability to carry out monthly invoicing, and the joint impact could be far higher than 70%, depending on the timing and nature of the interruption.

Peripheral costs: don’t forget to add in the cost of lost contracts, regulatory penalties, reputation and brand damage and even an impact on your share price. They might be difficult to forecast, but those costs are nonetheless very real.

The cost of downtime is likely to be a shock but the last thing you should do is bury your head in the sand and hope it doesn’t happen to you. Disaster can strike at any time, and a business continuity and disaster recovery plan is a business essential. When you have one in place, make sure you regularly test it. Anecdotal evidence shows that over 60% of organisations test their disaster recovery plans less than once a year – and some never test them at all.

For our global cargo and aircraft ground handling client, every minute of downtime would cost them over £7,500. Working with best of breed IT tools we have helped them slash their recovery time from days to minutes. Much of that change involved strengthening the business continuity plan, and regularly testing and revising it.

The question you are probably asking yourself now is how long your business could last without systems and data, and how much that is worth to you.“

This was posted in Bdaily's Members' News section by Julie Brammer .