In my work with companies on their infrastructure, one thing stands out to me in almost every conversation; most companies have not looked at their particular cost of IT downtime. What does down time cost YOU? You know it costs something, right? Unfortunately most companies don’t really take a hard look at what downtime costs them until they experience an extended outage of some kind. Even then, quite often they don’t really do the math they just realize that it was painful and they do not wish to repeat the experience.
The catch phrase Mission-Critical gets used a good bit but understanding what is mission-critical for YOU is the real issue. This can differ greatly from organization to organization. Is the internet mission-critical for you or is some internal application the real lynch pin? Determining this is essential to the next step in the process, assigning a cost.
One company I worked with had experienced several significant phone/data outages so they could easily calculate their cost. They just looked at an average normal day’s revenue against the averaged revenue of the days they had outages and subtracted…voila….they had a pretty good idea of what their downtime cost. If you don’t have those numbers another way is to analyze where your revenue comes from by percentage. For instance, if 20% of your revenue comes from phone/fax and 80% comes through the internet in some fashion then you take your average daily revenue….say $10,000.00 and divide accordingly, in this case $8000.00 and $2,000.00. In this example, an internet outage would cost this company $1,000.00 per hour, based on a normal 8 hour day. Now you may be saying that this is really simplistic math, and it is, so why do I need to do this? Simple, until you do this, you are making critical business decisions based on hazy speculative information. Not having this information is just like saying, “If we add ABC widgets to our line of products, we are pretty sure that we can increase our sales some.” Sadly, that’s probably the way some decisions get made but even the people making them would probably tell you that this is not the best way to do it. Armed with the right information, you now have the ability to make really smart decisions about your infrastructure. For instance, ABC Company had 16 hours of downtime last month costing them $16,000.00 (using our earlier example). If they invest $2000.00 per month in maintenance, they should be able to decrease downtime by at least 8 hours netting the company an extra $6,000.00 per month ($16,000.00 less $8,000.00 for the downtime they didn’t have and minus the $2,000.00 for the maintenance). Now you are talking about something that everybody can understand and support. In a business situation, is this not the logical way to think about most everything since the main objective of every for-profit entity is to make profit? This is just pure cause and effect reasoning, because we don’t do X, we are experiencing Y and Y costs us…….fill in the blank.
In order to move initiatives forward, you have to have the proper tools. Which would you rather do, go into a meeting with your boss and say, “I need to spend $200,000.00 to beef up our infrastructure and maintenance.” Or “Last year we lost $350,000 due to IT downtime, if we beef up our infrastructure and maintenance, we can save over $100,000 per year.” Hmmmmm, which one of those would get the more positive reception?
The reasons why you need to know what your COD is:
1. It’s like PUE and all the other things that you need to know, you just need to have that information.
2. Downtime is a cost just like electricity and salaries…..it must be measured and controlled.
3. COD is the easiest way to get everyone to understand and buy into initiatives.
So……what’s YOUR COD?
