Calculating the Cost of System Downtime

An IT project can be difficult to get approved by senior management, especially if they do not understand the implications of it. But avoiding the right technology upgrades could be increasing your company’s expenditures rather than reducing them. Help your business executives visualize and understand the risks associated with not doing a project by providing them information based on the bottom line. Here, Mindcore provides you with insight on how to help calculate the cost of system downtime for your business. This post is meant to help IT professionals and others who may be responsible for communicating solutions for their business’s operations.

Draw a Clear Picture

Many times in business, visualization can make the issue at hand much more manageable. As an IT specialist, try to put yourself in the shoes of someone who has no knowledge of the topic. Help senior management to understand why they should care about the project. If they feel their own success is being affected by it, they will be more invested in following through with it. 

For example, assume you run a business with five remote offices across several states. You are connected through a wide area network with a total of 500 employees who need constant access to the company’s technology in order to be productive. If the router at your home office fails and you have no backup, there will be a significant loss in productivity. This could cause notable damage to the company’s financials among other things such as:

  • Client satisfaction
  • Employee morale
  • Revenue loss
  • Possible loss of clients

If you’re still unsure whether you can convince your senior management to approve a project, share the numbers with them. This will provide concrete evidence of the potential impact on your business that is almost impossible to ignore. Your message will come across even stronger when you have the numbers to back it up.

Quantify the Potential Impact

Taking the example from earlier, your ability to demonstrate the financial implications of a single router failing will be extremely impactful. Follow these few steps to calculate the “cost of downtime”: 

  1. Figure out the average hourly salary of the employees directly impacted. You can easily do this by getting in touch with human resources for a rough estimate. 
  2. Next, decide on the productivity impact factor. This can be as low or as high as necessary, depending on the nature of the affected employees’ work. Factors can include things such as database size, software complexity, schedule constraint, etc. 
  3. Finally, calculate the “cost of downtime” which can be defined as: (Impacted Employees) x (Productivity Factor %) x (Avg. Hourly Salary)

Let’s calculate our “cost of downtime” using hypothetical numbers. With the example from above, the formula for our potential productivity financial impact is as follows: 

Cost of Downtime: (500 impacted employees) x (50% productivity factor) x ($20 avg. hourly rate) = $5,000 per hour 

Say the cost of the project is around $5,000 to install a backup router. That is equivalent to one hour of downtime, which proves to be a wise investment on behalf of senior management. With strong evidence to support your recommendations, you’ll be one step closer to securing the approval you need.

The Benefit of Using a Virtual CIO

According to Gartner, the average cost of system downtime is $5,600 per minute. Aside from the tangible costs associated with downtime, your company also must consider the intangible costs. These costs can do the most damage in the long-run, especially when it comes to reputation and brand image. 

However, by using a Virtual CIO (Chief Information Officer) to help manage your IT solutions, you can minimize that risk dramatically. The primary role of this resource is to formulate strategic goals for your company and help you implement them according to your budget. Collaborating with a company whose services are dedicated to IT will ensure that your system is optimized and highly reliable. 

Managed IT Services in New Jersey

At Mindcore IT Services, our team of experienced IT consultants are ready and willing to help your business reach its highest potential. We understand that no two companies are the same, which is why we pair you with a dedicated IT specialist to come up with the right plan of action. Schedule a call today and take back control of your technology. 

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