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Cost of Downtime Index

Cost of Downtime Calculation for Budgeting

How do you decide how much to spend to keep things running?  You do it by creating a metric that functions on your real business data, the cost of your down time.

The Cost of Downtime Index (CoDI) is a valuable tool to help you decide how pro-active you should be with your approach to keeping your Information Technology working as expected.

Your CoDI should include the following costs:

  • Wages, utilities, lease and footprint expenses.
  • Stress that impacts employee retention.
  • Lost productivity.
  • Missed opportunities.
  • Reputation damage. 

  

Below is an example cost of downtime metric calculation for illustration from a real local business:

A local business employing 15 people full time and several part time is using computer software for email, for cash flow, for inventory flow, and for phone communication.  Their costs break down as:

  • 180 hours of production time per month (45 per week), at $25,000 in revenue per week, or $556 per hour over 180 hours of production per month.
  • $20,000 per month for lease and utilities, works out to $112 per hour over 180 production hours per month.  
  • Reputation damage is important to them because they have several large regular customers, so they value the reputation impact at $100 per hour.

Their Cost of Downtime Index is $768 per hour.  This means a three day outage where they have no server or internet access will cost $20,700, a potential cost they use to justify investing an additional $10,000 per year to prevent outages and normalize them when they can't be prevented.  One of the ways you prevent unplanned outages is by monitoring your computers for pending failure conditions, and doing regular maintenance on both the hardware and software to keep your systems running as expected.