What is the Cost of An Outage and Just How Much Profit Are You Losing? -

What is the Cost of An Outage and Just How Much Profit Are You Losing?

June 21, 2022

America has more power outages each year than any other developed country in this world. America’s power outages are due, in large part, to the outdated and rundown power grids across the country. Some power lines date back to the 1880s, while many modern power grids were built in the 1950s and 1960s.

With these facts in mind, it is important to keep in mind that you are likely to experience an outage. While your employees may be thrilled, your pocketbook won’t be! Outages cause a significate financial loss and worse yet, they may cost you future revenue. Protect your digital assets and data before it’s too late. Contact Cocha Technology for your Cloud Security Assessment.

Calculating the cost of an outage enables you to predefine the financial impact your business would suffer.

Hourly Cost of Downtime = Hourly Lost Revenue + Hourly Labor Cost + Hourly Recovery Cost + Hourly Indirect Costs

The cost adds up fast! To give you some perspective the 73-hour outage last year at Roblox cost the Metaverse company an estimated $25 million in lost bookings.

Hourly lost revenue: Customers cannot buy from you during an outage. The first step is to determine how much you normally sell each hour. Begin with the company’s annual gross revenue divided by the number of hours per year available you sell your products and services.

Hourly labor cost: Begin by multiplying the number of employees who would be affected by an outage by their average hourly wage. Then, multiply that by your best estimate of how much productivity would be lost during an outage. For example, if no one in the company can work during an outage, you would multiply by 100 percent, meaning that productivity stops entirely.

Hourly recovery costs: These are the costs you incur in restoring services, such as repair services, replacement parts, or lost data recovery. There may also be operational costs involved due to missed service level agreements, expenses to notify customers, validate restored functionality and provide reason for outage. Be sure to factor in the costs of any third parties you may utilize.

Hourly indirect costs: These are associated with lost revenue. You have already accounted for lost hourly revenue due to lack of sales, which is a direct cost of downtime.

The following cost components are difficult to estimate but evaluating each one gives you a more complete picture of your true cost of downtime.

Think about the loss of reputation and damage to your brand. Your outage certainly frustrated customers. Some of them, for example, might post negative remarks about your company on social media. Marketing dollars may need to be spent to repair your reputation or brand. What dollar value do you attribute to addressing negative reviews and reputation repair efforts?
Also, think about and estimate the opportunity cost of downtime. While you are spending your resources on restoring service; what could you be doing rather than restoration and what opportunities might you have missed during the outage?

Statistics you should also consider:

Power-related outages account for 43% of outages that are classified as significant (causing downtime and financial loss)
43% of data center outages are due to power outages – Source Uptime Institute
Nearly 30% of outages in 2021 lasted more than 24 hours, a significantly disturbing increase from just 8% in 2017 – Source Uptime Institute
Downtime expense is also becoming more expensive, with more than 60% of failures resulting in at least $100,000 in total losses, up substantially from 39% in 2019. The share of outages that cost upwards of $1 million increased from 11% to 15% over that same period – Source: Data Center Knowledge
A study of 584 U.S. based data center professionals found that: 91% of data centers have experienced an unplanned data center outage in the past 24 months – Source: Data Center Knowledge
In a USA Today survey of over 200 data center managers, over 80% reported that their downtime costs exceeded $50,000 per hour. Over 20% reported downtime cost over $500,000 per hour

93% of enterprises that suffered from a data center down time for more than 10 days, filed for bankruptcy within a year of the outage? – Source Lifeline Data Centers
Even though the cost of data center down time is hard to measure, a recent study initiated by Ponemon Institute indicated that on an average, downtime can cost an alarming $5,600 per minute or $336,000 per hour!

Source: Lifeline Data Centers