Calculating the Cost of Server Downtime and How to Avoid It
In 2017, 33% of the enterprises as part of an ITIC study reported that a single hour of downtime costs them a whopping $1 million or more in losses.
For 81% of the firms, the same was as high as $300,000.
In the present-day business landscape where digital infrastructure plays a persistent and inexorable role in supporting business processes, downtime can cause tremendous losses for the enterprises, even when it is a planned event. Then there is the collateral damage associated with downtime like loss of data, loss of customer trust, and bad customer experience, which magnify the business loss in the longer term.
Needless to say, it is of paramount importance for businesses to take the necessary steps to either minimize downtime, or in the least, mitigate the damages caused by the downtime.
To embark on an investment drive for a tech refresh to mitigate downtime costs, the savings must justify the investments. The CFOs have grown increasingly welcoming of IT initiatives, considering that IT has emerged as a major business driver and a source of competitive advantage in many enterprises. However, the fact remains that they still need compelling reasons in the form of benefits to the organization to justify the costs associated with new initiatives. That brings us to the core problem – quantifying the business cost of server downtime.
How to Calculate the Costs of Server Downtime
Every business and every industry differ in their reliance on technology. Businesses that deal in high-value, time-sensitive, and high-intensity transactions like banks and ecommerce businesses will incur substantially higher costs from downtime in comparison to the likes of real estate or construction businesses. However, all organizations have business processes that rely on IT, so downtime affects them all, albeit at varying intensity. Here’s how CTOs and CIOs can calculate the business costs of downtime to build a solid business case for replacing server hardware.
1. Revenue Costs
If your business operates a customer-facing platform that registers a number of transactions on a continual basis, then unexpected downtime directly translates into the inability of the customers to perform the transactions during the period of downtime. A huge chunk of the customers who face the issue may be permanently lost to your competition. If switching the service provider is difficult in your industry, then perhaps your losses are limited to the lost transactions for the period of the downtime.
So, depending on the type of industry and business operations, businesses must consider the appropriate factors that contribute to their revenue loss from the following:
- – Labor Cost: hours of downtime, average employee salaries and benefits normalized to hourly figures, and the number of workers affected by the outage
- – Lost Revenues: revenue generated per customer per transaction, number of transactions made on an hourly basis, and so on.
2. Damage to Brand
Downtime can evoke swift and immediate rebuke from your customers. They may inundate your customer support team with complaints, and that’s a good thing. The worst thing they can do is take to the social media and vent out their anger and frustration. If that happens, it can cause irreparable damage to your brand’s reputation. And, that means a massive PR management exercise to salvage the brand image.
CTOs can use the data available from previous such exercises to quantify the costs associated with such PR disasters.
3. Availability and Data Loss
If your IT infrastructure is not a critical aspect of your business, then you can take your own time restoring your digital infrastructure when you are faced with an unexpected downtime. There can also be plenty of room for data loss.
On the other hand, if your IT infrastructure supports critical process, be it within your organization or in your customers’ organizations, the downtime should last a handful of seconds. In addition, the data loss should be the bare minimum. That means setting up of expensive hardware that can replace existing hardware for mission-critical processes.
4. Compliance and Legal Costs
Depending on the legal landscape in countries of your business’ operations, your business might be exposed to possible compliance violations and lawsuits that can often jeopardize your organization’s very existence. A review of the possible costs associated with lawsuits and settlements is in order and should be factored in when considering a tech refresh.
Whether you’re looking to for lowest ongoing cost or quickest profit from replacing your legacy servers, calculating your total cost of ownership (TCO) or return-on-investment (ROI) will help you choose the best solution for your needs. Get simplified tables, charts and figures to give you an approximation of TCO based on your input with this HPE ProLiant Calculator.
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