Downtime and Outages – Understanding Their True Costs

Posted by CoreSpace Admin on Feb 20, 2016 08:49:58 PM
Downtime and Outages – Understanding Their True Costs

Could your company afford to be out $8,000 a minute? Ours neither.

But that’s just what Data Center Dynamics found two years ago when it calculated that for every minute of data center downtime, the typical business averages a loss of $7,900. Extrapolate that out and once you hit the two-hour mark you’re looking at close to a million dollars in losses. For larger companies that figure can be much higher.

According to Gartner, each year these larger corporations suffer a staggering average 87 hours of network downtime with the hourly costs far exceeding that estimated above and quickly reaching five-figures.

When it comes to revenue losses, downtime figures quickly stack up. However, the fallout from downtime-related IT failures doesn’t merely concern your bottom line. In fact, the impact can be felt through every major facet of your business from ERP and billing to sales and HR just from a power failure or HVAC breaking and causing the server closet to over heat.

Thinking beyond the almighty dollar, we contend there are far more important costs on the line when it comes to data center outages. Here’s a brief look at the company reputation and employee productivity losses that, while harder to calculate, may actually end up costing you more in the long run.

Calculating your Monetary Costs and Losses

First, there are two simple yet effective formulas that can help you pinpoint with remarkable accuracy the total labor costs and revenue losses associated with downtime from your in-house infrastructure failure.

The first deals with your total labor costs incurred with each overall outage.

LABOR COST = P x E x R x H

P = number of people affected

E = average percentage they are affected

R = average employee cost per hour

H = number of hours of outage

The second is a useful formula to help you understand your total lost revenue per outage incident.


GR = gross yearly revenue

TH = total yearly business hours

I = percentage impact (A high percentage would mean you can’t complete any transactions, will loose clients, and have a PR nightmare)

H = number of hours of outage

Calculating the annual cost at the end is simple. All you need do is multiply the number generated above by the total expected annual hours of outage.

How Your Reputation and Customer Loyalty is Impacted by Downtime

Unlike the calculations above, you can’t put a price on your reputation. Its worth is more lasting and long-term on your revenue and profitability.

Whether it ultimately manifests as paying overtime for extended staffing, increased marketing hours, or unplanned PR help to contain a negative media blitz, a network or power outage, even a relatively short one, can have major fallout on your reputation at large.

In the internet-fueled instant gratification society we now live in, loyalty is determined by the speed with which you can fulfill a need. Suffer an outage and you could instantly see your customer base effortlessly siphoned off by the competition. Associate a “lifetime value” with even one of these customers and you’ll quickly realize the impact of them making a permanent switch.

Still, both large and small companies alike will experience lost opportunity in an outage. However, imagine what it looks like from an outside perspective when a huge airline or fortune 500 company can’t deliver? Shaken consumer confidence can be a hard thing to regain.

Even household names aren’t exempt. Take for example the aftermath in the Amazon cloud outage debacle. Their powerhouse status nearly compromised an entire industry of cloud security! In their downtime, countless customers were left to question the safety and dependability of the cloud.

How an Outage Might Impact your Employee Productivity

While intangible, employee morale and retaining qualified staff is essential for any operation. After a data center downtime occurs, it isn’t uncommon to ask staff to work overtime hours to make up for the lost time.

This impacts their time spent with family, offsetting their work-life balance. It can be hard to justify this extra time, especially if a company experiences more frequent outages.

Imagine the overall impact if you were to lose a highly valued employee due to this lack of consideration for his or her time. It could drag your whole team down, not to mention be a drain on other employees while they pick up the slack until someone qualified is recruited.

In the end, while sometimes an outage is out of anyone’s control, the fact remains that the largest majority of company infrastructure outages are the result power, network and HVAC failures. These preventable outages have a readily accessible solution in the form of colocation. Consider the financial fallout, harder to wrestle reputation and productivity implications that might be otherwise prevented with the 24/7/365 on-site redundancy and security provided by colocation services.

Get your IT out of the closet

There are a lot of companies that still keep critical servers and valuable revenue supporting systems in the office IT closet just waiting for a disaster. Unless your focus is building access security, HVAC density, Power redundancy and Internet resiliency, it’s time to use the experts who focus on infrastructure.

Don’t spend time worrying about the water leaks from the  bathroom on the floor above your server room. Never worry about the 5 minutes you have on the rack mount PDU that only temporarily prevents power loss. When the 5 minutes are gone… there is no generator to keep the servers and applications online at your office when the power doesn’t come back. Stop worrying about the unstable internet connection that may not work when inclement weather hits your area. Get away from the fear of theft at your office location and the worry of what would happen if someone gained access to your servers sensitive client data.

There are better ways to take care of your IT needs. These things are not what you do for business, these worries are what takes away from your focus. Can you safely say that your mini data center is a part of your “core” business? Unless you can, then diverting so much attention and carrying all that risk just doesn’t make sense.

Making the right decision to keep your business going

When planning your IT initiatives and business continuity strategy, deciding to put those IT needs in a redundant data center colocation facility that protects your business is always a great plan of action. Even if your business is IT, its focus may not be running a data center. Let the colocation experts keep you online and ongoing so that you can focus on what you do best is what CoreSpace does for your business.