Downtime: It will cost you!

Downtime cost analysis is a numbers game. The objective is simple – to find the magic number….the  
point at which the costs of downtime exceed the costs of prevention and mitigation. This is the point of justification....

Playing the Game

Everyone knows that downtime is costly. Everyone also knows that downtime is preventable (to a certain extent), and certainly, what cannot be prevented, can be managed and mitigated. But this knowledge alone may not move anyone to act, largely because "action" is also costly. It takes time, money and staff resources to analyze needs and develop working solutions. And, above all, expenses have to be justified.

To play the game, IT staffers must be able to quantify the costs of downtime in real business terms .... moving downtime from the realm of complaint into "costs and consequences". To achieve this goal, the following questions must be addressed:

What is downtime?

"Downtime" is hard to define. The meaning will vary by organization, person, system and event. On a big picture level, downtime occurs whenever a given system (application, server, network) cannot be accessed or used for its intended purpose. Obviously, there are "shades" of downtime based on the degree of impact (intermittent interruptions or full-blown outage), duration, frequency, visibility (internal systems versus external systems for customer usage), and extent (the number of end-users and locations involved). These "shades" drive related costs and the need for effective management solutions.

What is downtime management?

Downtime management is a combination of physical solutions (hardware and software) and logical practices (policies and procedures). The goal of downtime management is prevention (to minimize downtime occurrences) and mitigation (to minimize the impact of downtime when it occurs).

What are the costs of downtime?

Downtime costs must be viewed in terms of "tangibles" and "intangibles".

Calculating Tangible Costs:

Step 1: Identify the systems to be reviewed, including any infrastructure devices, servers, desktops, applications and productivity systems (phone, email, video-conferencing, internet access). To complete your analysis, you must understand how a given system is used, and its value within the organization in terms of:

· Revenue: Is the system directly involved in revenue generation, i.e. ecommerce?
· Operations: What internal operations does this system support?
· Productivity: How is this system used to increase internal productivity?
· Customer Relationships: What role does this system play in the service of external customers?
· Regulatory Requirements: How does this system help us to meet regulatory requirements?

Step 2: Identify a typical downtime scenario to use as a costing example.

Step 3: Identify your cost factors:

Cost Factor You need to know:
End-User Costs:

· A= Number of Users Involved

· B = Hourly Cost per user
· C = Number of Hours Lost
· A x B x C = End User Cost
End-User Overtime Costs The amount of money paid in overtime to employees directly resulting from downtime.
IT Staffing Costs · A = Number of IT Staff involved in Downtime Resolution.
· B = Hourly Work Cost per IT Staffer
· C = Hours Spent in Downtime Resolution
· IT Costs = A x B x C
IT Overtime Costs The amount of money paid in overtime to IT staffers as a direct result of downtime.
Vendor Costs Monies paid to vendors or consultants to resolve downtime.
Recovery Costs Monies spent to restore data lost as a result of downtime.
Lost Revenue Revenue lost as a direct result of downtime:
· Lost transactions.
· Lost contracts.
· Lost customers.
Emergency Processing Costs The costs of alternative processing activities (the cost to complete work that could not be completed due to downtime.) Example: Outsourcing printing operations because internal printers are unavailable.
Regulatory Costs Monies paid in fees and fines as a direct result of downtime.
Calculating Intangible Costs:

Downtime costs extend beyond dollars and cents, into the intangible realm of workplace productivity. Considering the sensitivities involved, downtime can become quite personal ("I can’t get my work done because of you and your systems", or "My customer is mad at me because of you and your systems"). As such, downtime can have a negative impact on:

· IT/End-User Relationships

· Organizational Trust in Technology (leading to a technology aversion and an unwarranted reliance on manual operations).

· Staff Morale

· Company Reputation

· External Customer Relationships

· Future Growth and Revenue Potential

What are the costs of downtime management?

Downtime can be prevented (to a certain extent) and it can be managed, but at a price. To identify the costs associated with downtime management, you first have to examine the alternatives for prevention and mitigation:

· Hardware Solutions: Physical hardware solutions needed to prevent or mitigate downtime occurrences.

· Software Solutions: Physical software solutions needed to prevent or mitigate downtime occurrences.
· Systems Management Practices: Procedures and practices used to manage systems in order to prevent or minimize downtime impact.

· Administrative Practices: Procedures and practices used to manage userids, passwords and technical support as part of the effort to prevent or minimize downtime impact.

Each of these solutions and practices have to be planned, implemented and maintained. As such, there are costs.....

Tangible Costs:

· Design and Development: Costs to analyze, design and develop technical solutions and management procedures.
· Acquisition: Purchase costs for hardware and software solutions.
· Implementation: Costs to implement solutions and practices (including internal and external resource costs).

· Training: Costs to train IT staff and end-users.

· Management Overhead: Costs to maintain downtime management solutions and practices on an ongoing basis.

Intangible Costs:

· Systems Overhead: Loss of performance due to downtime prevention measures (redundancies, security, virus protection, etc.)

· Usability Impact: Cost to personal "end-user" productivity as a result of downtime prevention measures.

Put it all together….

Once you can identify the costs of downtime, contrasted with the costs of downtime management, you will be in a position to weigh overall costs and benefits. The primary working assumption has to be this:

Downtime is costly and unproductive and should be avoided to the extent possible and practical. The question is …. what is "possible and practical"?

The answer will vary by organization, circumstance, and even by individual system. To find your "possible and practical" solutions you will need to weigh individual downtime consequences against viable management solutions, looking to find the right balance between cost and benefit. Obviously, IT must take advantage of all available "best practices" to ensure that technology is properly installed and maintained. But, fully redundant hardware systems, while theoretically desirable, may not be cost justified under all situations.

CONCLUSIONS.....

Any steps taken to prevent and mitigate downtime must be targeted (relevant to business needs and downtime costs), realistic (you must have the staff and the resources to make it happen), and effective (it has to get the job done). As costly as downtime may be, the costs of false expectations and unfulfilled promises may go beyond actual measurement.