I was doing some research on the costs and causes of network downtime and came across a more recent white paper than the information from 2001 that I had previously found. This paper, The Impact of Network Downtime on Business Today, was done in 2007 by Networks First, in conjunction with Warwick Business School. It shows statistics from nine different industries. The cost of an hour of downtime ranged from a low of a few thousand dollars (the study was in British Pounds, so I'm converting to approximate dollars) to over $600,000.
The prior costs I had seen were pretty old, from an Infonetics study The Costs of Enterprise Downtime 2003, which studied the costs of six organizations in different industries. It is generally straight forward to determine the costs of downtime. The major factors are:
* Hourly cost of staff time in terms of lost revenue (this is lost sales; one calculator also included the cost of lost sales, which is a component of lost revenue, so think carefully about what goes into the calculations)
* Hourly cost of staff salary, benefits and facilities
* Hourly rework costs to make up for the lost time
* Customer dis-satisfaction
There are a number of calculators available on the 'net that allow you to enter estimates for the parameters to calculate the cost of downtime. Sometimes you will find them along with a product that claims a reduction in downtime and an ROI calculation from purchasing and using the product.
You can easily do your own calculations on ROI, based on what you know about your network's reliability. That's where the real value lies in using one of these calculators. The vendors using a calculator to determine ROI are speculating about a network outage that their product could have eliminated. But a clearer ROI originates from improving a network's current resilience (see my prior post Network SLAs - Which one to use? If your network is 5-nines (99.999% available), you have about 5 minutes of downtime per year. But a network of 3-nines (99.9% available), you have 500 minutes of downtime a year. There is a direct ROI if you can reduce your downtime each year through the use of network management tools, processes, and people to implement them. Just think of the ROI of changing your network management methodology to reduce the downtime by 50%. In my 3-nines example, it avoids just over four hours of downtime. That is some serious savings and can easily justify a good NMS tool like NetMRI.
-Terry