Telecom Infrastructure has become more and more critical to doing business. The downtime cost of unexpected network or application failures can have both a direct and far reaching impact on your bottom line and ongoing business operations. There have even been cases where they have caused the affected company to go out of business.
Even with all of the advancements in technology; database, hardware, and software downtime still need to be planned for and mitigated against. The only way to mitigate the risk is to prepare and have the right technology in place to monitor, restore, and restart.
Factors in determining the Cost of Downtime
The first step in mitigating an outage is to determine what an outage costs. This information can assist in preparing the business case for investing in the resources and technology that will lessen the impact of an outage on your business. Monetary losses are dependent on various factors such as your revenue model, industry, duration of the outage, the number and types of employees impacted, the time of day, etc. Companies whose revenues are derived from phone sales and support versus those that are based on high level data transactions (i.e. banking and online sales) will experience different levels of impact from a service outage. If either experience an unplanned outage during a peak traffic time, the damage will be more significant.
Cost of Downtime Per Hour
There are many formulas that can assist you in quantifying the financial impact of not being able to do business. Below are a couple calculations to get you started with a ballpark impact cost number:
For companies where revenue is heavily reliant on employee interactions (i.e Phone Sales);
Hourly Downtime Cost = the average amount of sales per hour plus the totaled hourly fixed costs of the employees impacted by the outage.
For transaction based income streams (i.e. Online Sales) the calculation is pretty simple;
Hourly Downtime Costs = Average hourly transaction amount.
These calculations cover either end of the revenue model spectrum. Your business will probably fall somewhere in between so your downtime costs calculation will be a mixture of both formulas.
Remember there are also costs that are not easily quantifiable or attributable to the outage such as reduced productivity for the order fulfillment teams or lost sales due to customers going elsewhere.
Once you have a view into what the cost of downtime per hour is, you can calculate the value of reducing the costs of response and recovery for each application and system. To do this, you need to calculate the cost of downtime per hour. This information will in turn balance your spending to shorten your Recovery Time Objective (RTO) and your Recovery Point Objective (RPO).
Recovery Time Objective (RTO)
RTO is defined as how much time do you need to restore your applications and systems after an interruption. Your RTO is really a measure of how highly available your applications need to be. If your company can survive with and RTO that measures in days instead of seconds, then you can take your time setting up a new server or installing an application. If you need your operations to resume within minutes, this requires more expensive technologies and processes.
Recovery Point Objective (RPO)
RPO is an acceptance of how much data you can afford to lose? Your RPO is the maximum amount of acceptable data loss measured in time. A company’s order entry system might only need to hard copies to cover the fulfillment cycle, allowing for the ability to restore the data manually in the event of a disruption. You need to work with all key stakeholders to determine how much data your company is willing to lose.
In conclusion, calculating the costs of downtime will help to justify a cost-effective solution that can avoid detrimental effects to your business by implementing technological and procedural solutions that can lessen the impact of service outages.
Teledata Select offers a whole range of services that will help you meet your business goals. Starting with a complimentary review of your current telecommunication bills to identify errors and find opportunities for savings, better service and more functionality. We also offer project management for new service implementation and infrastructure installs, including fiber and low voltage cabling. Call us at 404-257-1502 to discuss your current Telecom Service Solution and what you would like to get out of it. Or send us a note via This Link to start a no obligation discussion of your specific business technology needs.
Don Miller is a PMP certified Project Manager located in Charlotte, NC. He has come to Teledata Select via Seattle, New York and Washington DC. His experience running small to multi-million dollar projects in the Banking, Software, Telecommunications and Insurance Industries across the US has given him a wide range of business experience.