Downtime: How Much It Could Cost Your Business

Technological downtime is real, and it can be very costly for a business — especially if you don’t have an effective IT strategy in place that helps you rapidly resume business functions in the wake of an IT disaster. Data loss, employee job performance, sales, finances, client or customer trust, your reputation, your business itself — this is just a sampling of what’s at stake when IT downtime occurs.

If you’re wondering what downtime is, just imagine a scenario where your business’s functions are interrupted. That may include the crash of a major computer system, downed infrastructure, data loss, or maybe your network stops working. If downtime were to happen to you, what functions would be lost as a result? What data can’t be accessed (or is lost completely)? Who can’t do their jobs properly? Finally, what’s the financial cost, by the hour, of all of these technological failures? That’s what we’re here to help you figure out.

The Real Cost of IT Downtime

According to 2013 data from the Aberdeen Group, the staggering cost of downtime, across all business groups, is $163,674 per hour. Further downtime studies, conducted in 2016 by Information Technology Intelligence Consulting (ITIC), found that:

“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. And a record one-third or 33% of enterprises report that one hour of downtime costs their firms $1 million to over $5 million.”

While ITIC also reports that the average cost of a single hour of unplanned downtime has risen 25-30% since 2008, it’s also important to note that these are average hourly downtime costs; the exact cost of downtime will depend on the company’s size, so figures above could be lower or much higher. For instance, small companies reportedly lose $8,581 per hour; medium companies $215,638 per hour; and large companies lose $686,250 per hour of downtime. Finally, those working in financial services or stock transactions could experience downtime costs that exceed millions per minute. Furthermore, if an outage occurs during peak usage hours, businesses could experience figures higher than those found above.  

Rather than suffer the consequences of business downtime, invest in an IT business continuity solution. The reasons why you need a business continuity solution are fairly simple…calculating the very real costs of IT downtime are not. Luckily, we have a way to help you see just how much downtime could cost you — let’s take a look:

How to Calculate the Cost of Downtime

Now that you see how IT downtime can be costly for businesses, let’s calculate how much downtime could actually cost you and your business. To do that, you’ll first have to determine your business’ Recovery Time Objective (RTO) and Recovery Point Objective (RPO).

Recovery Time Objective (RTO): The duration of time within which a business must be restored — following downtime, an IT disaster, or disruption — in order to avoid unacceptable consequences associated with a break in business continuity. Can your business survive with RTO measures in days or must operations resume within seconds?

Recovery Point Objective (RPO): The maximum amount of data loss measured in time. To calculate RPO, think about how much data your company can afford to lose.

  • Determine your desired RTO — or the maximum amount of time your business can be without data before getting into serious trouble.
  • Specify your RPO. How often do you need to perform backups to protect your business from unacceptable data loss? This should be in line with knowing how much data you can afford to lose without damaging your business.

Note: You may have an RTO of a day and an RPO of an hour. Conversely, your RTO may be in hours and your RPO in minutes. It all depends on what your business data retention requires. This will also help you understand the type of data backup solution you need:

1. Cloud-Based Solutions: Popular, but they only provide a partial answer.

2. On-Site Solutions: Good to have, but they also have their weaknesses.

3. Hybrid Cloud Solutions: The best of both worlds. Hybrid Cloud data backup solutions help you quickly recover data from a local device, but if this local device is lost, destroyed, or unavailable, your data is still safely stored — and ready to be restored — in the Cloud.  

  • Answer these questions (per hour):
  • How many employees would be affected if critical data were unavailable?
  • What is the average wage of the affected employee (per hour)?
  • What is the per-hour overhead cost of the affected employees?
  • How much revenue would be lost per hour as a result of the unavailability of data?

4. Calculate how much downtime and data loss will cost you, per hour. Simply add up the average per-hour wage, the per-hour overhead, and the per-hour revenue numbers from above. 

Avoid the Cost of Downtime — Implement a Business Continuity Solution

Whether you’re a small-to-medium business or a large enterprise, calculating the real costs associated with data loss provides you with a better understanding of how these risks relate to business failure, as well as the very real need for a sophisticated backup solution. Without a business continuity strategy, a downed server could take hours — or even days — to fix, especially if you only have file-level backups. Can you afford that much downtime? Don’t assume downtime and data loss will never happen to you. Instead, prepare for it by taking preventative measures. Your future self will thank you.

The best way to prevent downtime and business interruptions — so that you can continue to operate in case of a disaster — is to implement a business continuity solution that uses data backups and these business continuity factors. Business continuity solutions involve so much more than simple backup strategies, so be sure to give Integracon a call at 865-330-2323 to discuss your individual needs. Once you realize your individual cost of downtime, you’ll start to see the real value in hiring a backup and disaster recovery vendor, like Integracon.

Learn more about business continuity solutions with the following links:

  1. Why You Need an IT Business Continuity Solution
  2. 5 Ways Business Continuity Plans Improve IT & Profitability
  3. What to Ask Every Backup and Disaster Recovery Vendor
  4. Backup vs. Business Continuity: Using RTO to Better Plan for Your Business
  5. Cost of Hourly Downtime Soars: 81% of Enterprises Say it Exceeds $300K On Average