How Much Does 1 Hour of Downtime Cost the Average Business?
Infrastructure matters. When your network or applications unexpectedly fail or crash, it can have a direct and far reaching impact on your bottom line and ongoing business operations. In some extreme cases, data and monetary losses from unplanned outages can even cause a company to go out of business.
Despite all the advancements in technology, database, hardware, and software downtime are an expected aspect of doing business. The only way to mitigate the risk is to prepare and have the right technology in place to monitor, restore, and restart.
How to Calculate the Cost of Downtime
The industry average cost of downtime is dependent on a lot of areas. The monetary losses vary when you consider your revenue, industry, the actual duration of the outage, the number of people impacted, the time of day, etc. For example, losses are significantly higher per hour for businesses who are based on high-level data transactions, like banks and online retail sales. If you experience an unplanned outage during a peak traffic time, clearly the damage will be more significant.
Can you afford to lose $100,000? Because that is the average amount of a single hour of downtime reported by an ITIC study this year. Every year since 2008, ITIC has sent out an independent survey to measure downtimes costs and over time the average cost of a single hour of downtime has risen by 25% to 30%. Here are the staggering results:
- 98% of organizations say a single hour of downtime costs over $100,000
- 81% of respondents indicated that 60 minutes of downtime costs their business over $300,000
- 33% of those enterprises reported that one hour of downtime costs their firms $1-5 million
Your organization can tolerate a certain amount of downtime before causing irreparable damage. But in order to know what that is, you need to understand the cost of response and recovery for each application. To do this, you need to calculate the cost of downtime per hour, your Recovery Time Objective (RTO) and your Recovery Point Objective (RPO).
Cost of Downtime Per Hour
The cost per hour of downtime is calculated by adding labor costs per hour to the revenue lost per hour.
- To calculate your labor cost per hour of downtime, you need to factor in your revenue, number of employees, average annual employee benefits, the number of hours worked per week, and the percentage of the workforce an outage would affect.
- To calculate your revenue lost per hour of downtime, you need to know how much revenue you make every day and the percentage of your revenue an outage would affect.
Recovery Time Objective (RTO)
How much time do you need to restore your applications after an interruption? Your RTO is really a measure of how highly available your applications need to be. If your company can survive with RTO measures in days instead of seconds, then you can take your time setting up a new server or installing an application. If you need your operations to resume within minutes, this requires more expensive technologies and processes.
Recovery Point Objective (RPO)
How much data can you afford to lose? Your RPO is the maximum amount of acceptable data loss measured in time. A company with an order entry system might only need to keep 5 days worth of hard copies, giving them the ability to restore the data manually in the event of a disruption. You need to work with all key stakeholders to determine how much data your company is willing to lose.
Downtime is Not All About Dollars
A bad experience is all it takes to shake a customer. When your business is unexpectedly down for a few hours in the middle of the week, you not only risk losing money, you also risk damaging your company’s reputation for delivering value. It might sound drastic but think about a customer who needs to make a particular transaction. If they can’t make it when they want, or when it’s the most convenient to them, then they will likely go find what they need elsewhere. And what about your confused employees? They are all sitting in front of a blank screen, twiddling their thumbs while they wait for the system to come back online. They don’t have the tools to be productive and that not only influences their overall morale, but impacts the customer service they provide in lieu of the outage.
Maximize Reliability and Uptime with Rand Group
Once you understand the true cost of downtime for your business, it’s easy to see that preventive measures are the key to protecting your business. With a cloud backup and recovery system, you benefit from complete system monitoring, secured servers, and upwards of a 99% guaranteed uptime.
Don’t keep your business at risk. At Rand Group, we have a full team of business, technical, and accounting resources to maintain your systems health and ensure business continuity. Contact our infrastructure experts today for a full assessment of your applications and server environment.
– Software Delivered as Promised. No Surprises.