Understanding Downtime Costs and Consequences in IT Management

  • from ITtoolkit.com

Image of desk calculator with a pair of dice on it conjuring the costs of downtime.

Everyone knows that downtime is costly. Everyone also knows that downtime is preventable (to a certain extent), and certainly, what cannot be prevented, can be managed and mitigated.  But this knowledge alone may not move anyone to act, largely because "action" is also costly. It takes time, money and staff resources to analyze needs and develop working solutions. And, above all, expenses have to be justified.  Read on to learn how it's done.

What is Technology "Downtime"?

"Downtime" is hard to define. The meaning will vary by organization, person, system and event. On a big picture level, downtime occurs whenever a given system (application, server, network) cannot be accessed or used for its intended purpose. Obviously, there are "shades" of downtime based on the degree of impact (intermittent interruptions or full-blown outage), duration, frequency, visibility (internal systems versus external systems for customer usage), and extent (the number of end-users and locations involved). These "shades" drive related costs and the need for effective management solutions.  (Also Read:  Offering Apologies for Service Problems)

All that said, a strategic approach to managing IT in business demands a "practical, big picture view".  Technology outages happen.  These events must be prevented to the extent possible (through quality service and operational management).  But, since downtime is largely inevitable despite the best practices, IT managers must consider all the "costs" and take appropriate action to mitigate negative consequences.

Understanding the Costs of Downtime

They say that everything has a "cost", and of course downtime in IT is no exception.  Of course, there are the hard costs, encompassing the financial expenditures needed to recover from downtime events, as well as the related financial losses directly attributable to downtime events (i.e. lost revenue due to an inability to process purchase requests or lost salaries due to an inability of staff to perform expected functions).

Then you have the other side of the downtime cost equation -- the "soft cost".  These costs may be more difficult to quantify in terms of a specific downtime event, but they are no less real or damaging.

How to Define the Hard Costs of Downtime

The first step is to identify all of the elements posing "downtime risks", including any infrastructure devices, servers, desktops, applications and productivity systems (phone, email, video-conferencing, internet access). The goal is to determine the level of exposure for downtime, and to quantify related cost factors - i.e. what are the potential costs associated with systems repair, replacement and related operational losses?  To complete this analysis, you must understand how a given system is used, and its value within the organization considering the following parameters:

  • Revenue - Is the system directly involved in revenue generation, i.e. e-commerce?
  • Operations -  What internal operations does this system support?
  • Productivity - How is this system used to increase internal productivity?
  • Customer Relationships - What role does this system play in the service of external customers?
  • Regulatory Requirements - How does this system help us to meet regulatory requirements?

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How to Define the Soft Costs of Downtime

When it comes to IT related downtime, soft costs are all about productivity consequences and "lost opportunity".  Downtime costs extend beyond dollars and cents, into the intangible realm of workplace productivity. Considering the potential sensitivities involved, downtime can become quite personal ("I can’t get my work done because of you and your systems", or "My customer is mad at me because of you and your systems").  As such, downtime can have a serious and negative impact on one or more of the following:

  • Downtime can diminish the level of credibility and trust in the IT department.
  • Downtime can damage the viability of the long term IT/end-user relationship.
  • Downtime can lead to lost productivity and create a need to re-do work already performed.
  • Downtime can cause IT staff to lose confidence in themselves, their organizational mission and will lead to diminished organizational morale.
  • Downtime can lead to ineffective work procedures believed necessary due to a lack of confidence in existing systems.
  • Downtime can make it more difficult to realize the strategic IT management vision.

Downtime Costs and IT Strategic Planning

Once you can identify the costs of downtime, contrasted with the costs of downtime management, you will be in a position to weigh overall costs and benefits. The driving force is the assumption that downtime is costly and unproductive and should be avoided to the extent possible and practical.  The question is... what is "possible and practical"?

The answer will vary by organization, circumstance, and even by individual system. To find your "possible and practical" solutions you will need to weigh individual downtime consequences against viable management solutions, looking to find the right balance between cost and benefit. Obviously, IT must take advantage of all available "best practices" to ensure that technology is properly installed and maintained. But, fully redundant hardware systems, while theoretically desirable, may not be cost justified under all situations.

Steps and strategies taken to prevent and mitigate downtime must be sufficiently targeted (relevant to business needs and downtime costs), realistic (you must have the staff and the resources to make it happen), and effective (it has to get the job done). As costly as downtime may be, the costs of false expectations and unfulfilled promises may go beyond actual measurement. That said, downtime should be prevented to the extent possible and practical, and all related management practices, including disaster recovery planning and proactive problem management, should be made an regular part of your IT management program and related strategic vision.


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