Scope & Cost of Downtime

Justin Thomas
Jul 27, 2017 · 2 min read

Ever wondered what is the actual cost of downtime. A good starting point for evaluating these factors is to collect statistics on both the duration and associated costs of past outages as recorded by your team.

Use the following equation to calculate the average labor cost of an outage:

LABOR COST = P x E x R x H

Where:

P = number of people affected
E = average percentage they are affected
R = average employee cost per hour
H = number of hours of outage

The simplest way to calculate potential revenue losses during an outage is with the equation:

LOST REVENUE = (GR/TH) x I x H

Where:

GR = gross yearly revenue
TH = total yearly business hours
I = percentage impact
H = number of hours of outage

Service costs are rarely zero. They always have some other intangible cost:

  • Overtime payments to make up for lost productivity?
  • Affect on your stock price if you are a public company?
  • Stopped a promotion campaign ?
  • Loss of customer goodwill eat into your ongoing revenue stream?
  • Plan and execute campaigns to explain and apologize for the outage?

Downtime leads to a cascading effect in terms of related costs. Work with your team to identify all such service costs incurred during or after a previous outage. Then, divide the total of these costs by the total number of hours the systems were down to give you the cost per hour for the downtime.

Summing all of the above costs gives a reasonable forecast of the loss you can expect to incur from an hour of outage for a particular system.

Costs will vary depending on the nature of the application, so you must perform this calculation for each system.

To calculate the expected annual cost, multiply this number by the number of expected annual hours of outage.

Justin Thomas

Written by

Internet Buff | Technology Freak | Wants to make a difference

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