By the Numbers: A Look at The Cost of Downtime

If your business has never experienced a major computer problem, then it's easy to underestimate just how damaging downtime can be. This conclusion can be drawn from a recent survey of small business owners, where 65% estimated they would only lose $500 if their company's network went down for a day. In reality, downtime is much more costly than $500.

The same study goes on to find that 20% of small businesses have a major IT accident resulting in downtime every five years; and of the small businesses that are hit with a major disaster, 40% will close for good. All of these statistics show us the danger of underestimating downtime. 87% of small business owners that believe they are somehow immune to a catastrophic disaster.

An IT disaster resulting in costly downtown and data loss can strike a business of any size and come from multiple sources that are uncontrollable, like hardware failure, a hacker attack, human error, and more. Additionally, downtime is more costly than what many would suppose it to be because it does more than result in a loss of revenue. Downtime will hurt your bottom line in other ways like the loss of productivity, damage control to make up for the lost time, repair expenses, and more.

Take for example a downtime situation experienced by Amazon for only two hours in June of 2008, it's estimated that Amazon lost $30,000 a minute during this outage. Nowadays, Amazon's revenues are three times what they were in 2008, which would put them close to losing $100k a minute if they experienced downtime today.

In another recent study, this one by CA Technologies, 200 companies across North America and Europe were looked at in order to determine the cost of downtime incurred from an IT outage. Of these 200 (large) companies, it was discovered that $26.5 billion in revenue was lost each year, which comes out to a $150,000 annual hit for each business. This study also discovered that IT outages are frequent, lengthy, and can do more than cause monetary damage. A loss incurred from downtime also hurts a company's reputation, the morale of the staff, and customer loyalty.

The cost of downtime will be different for every business. One thing every company has in common is that experiencing downtime caused by an IT outage will put an organization at serious risk of going out of business. Here are two formulas you can use to calculate the cost of downtime for your business:

The first downtime formula determines loss of sales:
Yearly Revenue/Business Hours x IT Impact to Sales % = Lost Sales

The second downtime formula factors loss of employee productivity:
Employees Affected x Average Employee Cost Per Hour x Average % Affected by IT = Lost Productivity

After determining the cost of downtime for your company, you may be shocked to see how expensive it would be to just lose one day of business to an IT problem. If you don't have a downtime solution in place because you didn't see the need, then you're not alone. In the CA Technologies study, it was revealed that "56% of enterprises in North America and 30% in Europe don't have a formal and comprehensive disaster recovery policy."

Downtime can be devastating to a business. The best way to prevent downtime is to have a reliable business continuity plan in place that will keep your operations up and running, even in the event of a major disaster. Directive can protect your business from downtime with our Backup and Disaster Recovery (BDR) solution. BDR continuously backs up your data throughout the workday to an offsite data center. BDR can also virtualize your network in the event of a disaster, meaning that your business won't have to suffer through one expensive minute of downtime!

To learn more about BDR, and to have Directive help your organization draw up its own business continuity plan, call us today at 607.433.2200.