Here, we explore how IT system failures, however occasional, can affect businesses negatively – both operationally and financially. As well as these important considerations, we provide an overview of the benefits of using a downtime calculator to highlight potential issues. That way, an organisation can be proactive and make improvements, before any weak areas or vulnerabilities become problematic.
Analysing the Threat
Quantifying the cost of failure in an organisation is often a requirement when justifying the expenditure necessary to pay for business continuity hardware, software and staff. Although the results of system downtime are obvious and the necessity for the contingencies required to mitigate them widely understood, the way to calculate the costs may not always be clear.
Fortunately, there is now a straightforward and practical method to estimate the cost of system downtime with ease – and free of charge. Using this calculator, an enterprise can evaluate whether the protective and preventative measures that it is evaluating will be cost-effective when compared to the price of failure.
Using the above calculator allows companies to evaluate the likely financial consequences of business IT stoppages, whether for a whole company or one of its departments. The calculation requires three main inputs: annual revenue, the number of employees and the average cost of each employee per hour. If required, the calculation can be proportional: computer outages would affect an IT worker almost totally, whereas the impact of downtime within marketing teams might typically be 80 per cent. Conversely, staff in sales roles might experience a 75 per cent reduction in output.
Assessing the Financial Effect
To quantify the potential outcome, there are four main areas to take into account:
- Reductions in productivity.
- Lost profits.
- Fines or penalties.
- Recovery costs.
Imagine a bulk sales order processing environment where a hundred sales support, administration, accounts and customer support staff are keying in commercial data to take, confirm and amend orders. They could also be printing delivery schedules, invoices and reports. In this example, if the business IT system were not available, work would be impacted severely.
In such examples, it is feasible to calculate the direct cost of employee idle time as a function of hourly pay or a proportion of monthly salary. Where staff can be re-deployed to perform other duties on a temporary basis, it is possible to mitigate the loss. Such activities might include updating manual records, off-line work, filing, tidying, office reorganisation or training. In cases like these, the same accounting principles and method of calculation apply, although pro-rata.
Nonetheless, even if the failure reduces productivity only partially, the opportunity costs and lost potential income per hour can soon stack up team-wide. In the fast-moving world of business, computer databases and their supporting networks form a significant part of IT infrastructure. Apart from their level of specification, hardware, software and firmware components have to perform reliably and deliver an uptime bordering 100 per cent, especially in customer-facing roles. As well as good network speed, the availability of applications and uninterrupted 24/7 access to transactions and operational data are vital.
Significantly, delays due to outages could result in organisations facing contractual penalty clauses for late or non-delivery. In particular, there might be a regulatory framework that imposes fines for not meeting deadlines or complying with set requirements.
In contrast, recovery costs include reinstating backups and replacement hardware systems in the case of faults. Then there is the delivery time of any necessary equipment or parts and their subsequent installation, configuration and testing to add into the forecast. Software-based rectification or configuration and support may be possible remotely, though there will still be a delay in returning to full productivity.
Planning Proactively – Proactive Planning?
Once we know the estimated financial impact of downtime caused by unexpected computer, network or infrastructure failure, along with its direct effects on profitability and operations, we should also address the indirect damage. Nearly seven in ten IT decision makers acknowledge that downtime has a detrimental effect on reputation and consumer confidence, not only in a particular brand but also in the company behind it. The toll will depend on the duration of the outage, how widespread the problem is and the time of day, along with the industry type and annual turnover of the company concerned. In extreme cases, the lack of availability of an adequate main or standby computer system could lead to liquidity problems and bankruptcy.
Similarly, interruptions and refocusing take their toll during typical working days, too. A telling study carried out by the eminent Department of Informatics in the University of California illustrated the negative effects that distractions have on business processes and productivity. According to researchers, office workers and staff typically took around twenty-three minutes to refocus after each interruption. Corrosive multitasking reduced quality thinking time and wasted up to 238 minutes per working day per person.
Nowadays, with computerised business systems, there can be few applications and databases that are not mission critical. Protecting an organisation from the effects of system outage (and other interruptions) is, therefore, a shrewd investment in its future. When looking for a starting point, the 3-2-1 rule applies: keep three different backup copies on two different media formats and with one of them kept off-site.
Notwithstanding the above precautions, there is more to it than regular, reliable backups. Replication and redundancy (i.e. a standby server or servers) are also necessary – or at least, a solution which can be brought online as quickly as possible to minimise system downtime. The aim should be to reduce service failures to seconds or minutes at the most, instead of hours. This objective is especially important when one reflects on the negative media coverage surrounding UK banking problems, inaccessible hospital records and the notorious PetNet incident in the USA that left animals unfed.
Supporting Growing SMEs: Onestop IT
Based in Scotland, Onestop IT is a leading information technology services supplier and consultancy that specialises in supporting SMEs by delivering enterprise technology solutions at an affordable price. As well as business customer care, Onestop’s focus is on process-driven IT solutions to help organisations grow.
Onestop IT’s team of friendly, professional IT experts will be delighted to assist with any queries you may have, including the effects of computer outages and contingency planning. Finally, if you would like to obtain an individually calculated estimate of the possible impact of downtime on your business, visit our free downtime calculator page now.