Calculating the Costs of IT Downtime

The facts show that the average cost of IT systems downtime is close to $5,600 per minute according to the Uptime Institute Symposium.

In the recent study “Calculating the Cost of Data Center Outages” The Ponemon Institute identifies the true bottom-line costs of data center downtime as:

• The average cost of downtime across industries was approximately $5,600 per minute.
• The average reported incident length was 90 minutes, resulting in an average cost per incident of approximately $505,500.
• For a total data center outage, which had an average recovery time of 134 minutes, average costs were approximately $680,000.
• For a partial data center outage, which averaged 59 minutes in length, average costs were approximately $258,000.
• The report cited the highest cost of a single event at about $1 million (more than $11,000 per minute).

(*The complete Emerson-Ponemon Institute report is available here.)

How costly is IT downtime in your organization?

A Simple Estimate:

Estimated Average Cost of hour of downtime = Employee Costs per Hour * Fraction Employees Affected by Outage + Average Revenue per Hour * Fraction Revenue Affected by Outage

• Employee Costs per Hour: total salaries and benefits of employees per week divided by the average number of working hours
• Average Revenue per Hour: total revenue per week divided by average number of open hours
• “Fraction Employees Affected by Outage” and “Fraction Revenue Affected by Outage” are just educated guesses or plausible range
• Since evaluating purchases, estimates are ok

Caveats

• Ignores cost of repair, such as cost of operator overtime or bringing in consultants
• Ignores daily, seasonal variations in revenue
• Indirect costs of outages can be as important as these more immediate
• Hence estimate tends to be conservative side

Real Example

Amazon 2001

• Revenue $3.1B/year, with 7744 employees
• Revenue per hour (24×7): ~ $350,000
• If outage affects 90% revenue: ~ $320,000
• Public quarterly reports do not include salaries and benefits directly
• Assume avg. annual salary is $85,000
• $656M / year, or $12.5M / week for all staff
• @ 50 hours / week => ~ $250,000 per hour
• If outage affects 80% employees: $200,000
• Total: ~ $520,000 / hour

*for more examples and a more detailed explanation, see: A Simple Way to Estimate the Cost of Downtime –Dave Patterson, EECS Department, University of California, Berkeley and http://roc.cs.berkeley.edu/talks/pdf/LISA.pdf