The cost to an organization
of network downtime can help determine and justify the actual cost of remote
monitoring and managed services.
Calculating the related cost
associated with downtime can be done several different ways, depending on the
type of business you are in and the use of your systems to generate revenue.
One way is to divide the
company’s gross annual revenue by your hours of operation. This
will give you a dollar value per business hour for your network's availability.
Multiplying this dollar value per hour by the number of hours of unplanned downtime
in the past year, will show the cost of that downtime to your organization.
Use this simple formula and
example to calculate the cost of downtime to your organization:
Cost of Downtime to
ABC Company
|
Your Cost of Downtime
|
|
Annual Gross Revenue:
|
$50,000,000 |
Annual Gross Revenue:
|
|
Business Hours:
|
divided by 2,080 |
Business Hours:
|
|
Per Hour Revenue:
|
$24,038 |
Per Hour Revenue:
|
|
Unplanned Downtime:
|
x 20.80
(hours) |
Unplanned Downtime:
|
|
Downtime Cost:
|
$499,999 |
Downtime Cost:
|
ABC Company operates one shift,
on a standard 8 hour day, totaling 2,080 hours of operation. If their
network and/or systems are down a total of 1% of the time, that is a total
of 20.80 hours.
Lost revenue is only one component
of the cost of downtime. Don't forget the lost work time of employees when your
network is down or critical applications are unavailable. The following chart
will help you calculate the cost of downtime in terms of lost productivity.
ABC Company Employee
Cost of Downtime
|
Your Company Employee
Cost of Downtime
|
|
Average Employee Salary:
|
$ 50,000 |
Average Employee Salary:
|
|
Burdened by 35%:
|
$ 67,500 |
Burdened by 35%:
|
|
Costs per Hour (divide
by 2,080)
|
$ 32.45 |
Costs per Hour (divide
by 2,080):
|
|
Multiple by Unplanned
Downtime:
|
X 20.80
|
Unplanned Downtime:
|
|
Downtime Cost:
|
$ 675 |
Downtime Cost:
|
|
Number of Employees:
|
100 |
Number of Employees:
|
|
Total Employee Cost
of Downtime:
|
$ 67,500 |
Total Employee Cost
of Downtime:
|
A full time salaried employee works 40 hours a week, totaling
2,080 hours a year. If their system is down 1% of the time, totaling
20.80 hours a year. Multiply the total downtime cost per employee
for all employees within the organization and determine the cost associated
with each employee on unproductive hours.
