Problem is, most businesses don’t follow a methodical way to calculate true cost of business downtime. It indicates the period when the business is not available. Manual errors, outages, failures or overloads are some of the causes behind unscheduled downtime.

1. The Real Cost of
Business Downtime
By Ghassan El Khazen
Engagement Partner, Edarat Group

2. The Real Cost of Business Downtime
Problem is, most businesses don’t follow a me- during a particular outage and then total it to di-
thodical way to calculate true cost of business vide by total number of hours, the outage extend-
downtime. It indicates the period when the busi- ed for.
ness is not available. Manual errors, outages,
failures or overloads are some of the causes be- This could not only help businesses to get an
hind unscheduled downtime. Natural disasters idea of the additional business downtime costs,
such as flood and earthquake could also result in but they could also save this as an insight and in
downtime. Disaster recovery and business conti- case another outage takes place in future, use as
nuity planning are required to prevent downtime. a benchmark.
Results of downtime are loss of data and loss of
application service. Maximum tolerable outage (MTO) is a parameter,
which signifies the maximum time a business can
There are some generic formulas to estimate the tolerate an outage. High availability is must for
business downtime cost. Total cost of an outage some businesses and they need to lower MTO.
is calculated in terms of losses in revenue, ser- They also need to run business impact analysis
vice and labor. Formula for labor cost calculation for setting a benchmark recovery time objective
is; (RTO). Just like RTO, recovery point objective
(RPO) is also defined by business continuity
L=PxRxHxE planning and disaster recovery planning depends
highly on it. RPO helps setting minimum frequen-
Here, L represents labor cost, P represents total cy between two backups.
number of people, who were affected due to the
outage, R represents cost per hour for an aver- RPO and RTO help a business to decide which
age employee, E represents average percentage disaster recovery plan or technology would be
of people affected and H stands for total number best for it. So, adopting robust business continui-
of hours the outage lasted. ty plan is very important.
There’s a formula as well to calculate loss in rev- Expectation from today’s data centers is huge.
enue. The formula is; The common perspective is that they’ll never go
down. But data centers are not always capable of
Yearly revenue (Gross)/Yearly business hours x meeting this expectation and as a result, busi-
Percentage impact to sales x Total outage hours ness downtime occurs. Therefore, a workable
disaster recovery strategy, based on a business
However, there are some intangible factors, continuity plan is required. That helps a business
which are difficult to include within the estimation to calculate real cost of business downtime.
framework. Such factors are mitigating lost
productivity, penalties for losing critical financial We, at Edarat Group, understand how much criti-
filing and on top of everything, loss of goodwill, cal a company’s downtime can be, which is con-
which could grind down a company’s revenue sidered part of the company’s profit maximization
source. strategy. We work on reducing the potential situ-
ations by acting proactively. Our Business Conti-
Even if companies could estimate the business nuity methodologies are based upon years of ex-
downtime cost by the use of aforementioned for- perience in both medium and large IT environ-
mulas, the assortment of related costs are very ments which guarantee that if a situation arises,
difficult to calculate. To fight it out, a business business downtime and data loss are minimized.
needs to have a robust financial team, which
would identify additional service costs, resulted
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