Business owners and IT managers spend an inordinate amount of time calculating levels of productivity, comparing those figures to previous fiscal periods, and determining ways to maximize profit when business is brisk. It’s only natural to focus on how to capitalize on the good times and hope for sustained growth.
Unfortunately, too few businesses and IT experts pay careful attention to the costs of downtime in the event of lost or damaged data, and what it means for the short-term and long-range profit and loss picture. While it may be human nature keep the thrust on optimism, it’s crucial for businesses owners to heed the real costs of systems, application and operational downtime in the IT environment and to acknowledge that the threat of loss is a tangible one. Every hour and indeed every minute lost due to planned or unplanned inaccessible data can be quantified, and it’s not a pretty picture. As such, keeping systems and operations at optimal functioning levels has never been more important.
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IT outages can wreak havoc on a business. The financial damage can be felt right away, and down the line. Some costs can be easily and readily assessed, while others are more subtle. Either way, the lost productivity can really add up and cripple any data-dependent business. The direct costs of data loss are easily quantifiable and include issues such as lost transaction revenue, as well as lost wages and inventory. Other direct costs include charges for remedial labor to assess and remedy data loss, increased marketing costs, and bank fees. Add to these costs legal charges for failing to deliver on service-level agreements, and the tangible costs become very real, indeed.
Beyond the direct and obvious costs, there is a range of intangibles that can also figure into the overall tally of IT downtime. Consider lost business opportunities; with critical data unavailable, businesses can’t promote themselves or pitch new business. A business’ brand can also depend on having data available; it it’s missing or lost, the brand can take a real hit. Data loss can also have a negative impact on your workforce and even on employee morale. (Data breaches have taken a serious toll on some of the biggest names in business in recent years.) There is also the impact on a company’s stock value; the shock of data loss can reverberate into the markets and send a stock price plummeting. Data loss or interruption can also take its toll on partnerships and partner goodwill.
Businesses without proper protections against data loss or breach also set themselves up to being vulnerable to shrewd competitors. Companies that are compromised open the door to others to capitalize on their shortcomings. A data breach or loss can give a green light to a competitor to pounce and take advantage of shortcomings. There is also the real but intangible impact of bad press and negative publicity. Companies suffering a data breach or loss — particularly consumer products firms and those that deal with sensitive personal data — can suffer lasting damage from the negative media outpouring. It can be immensely expensive to hire a top PR firm to run damage control and rehabilitate your company’s brand image.
A Downtime and Business Impact Analysis can help identify the financial impact of a data breach or loss on your business. It assesses the sensitivity of critical business functions — based on data or application integrity — to downtime. The ascertain the recovery objective of each business function, It’s important to determine the maximum outage time that each function can withstand before having a financial impact. Determining where vulnerabilities lie will go a long way toward identifying the costs of downtime, both in the short term and in the long run.
A thorough Business Impact Analysis should consist of these critical elements:
• Identifying essential business functions consistent with data and application integrity the sensitivity of each to downtime
• Pinpointing the maximum outage a business function can endure before it exerts a negative impact
• Assessing the costs associated with each disruption eventuality
• Determining the impact of a business function disruption on revenue, expenses, and overall personal impact
• Assessing the short-term and long-range impact of a data disruption on each business function
• Setting a recovery priority for each business function impacted by data disruption
• Pinpointing the most essential data and the resources needed to get the business function up and running
• Set alternatives to maintain productivity
• Determine what concrete measures to take to mitigate or eliminate the costs of a business function outage
Assessing the costs of downtime is critical in keeping your business functioning in the event of data loss. You can do this in a number of ways:
• Assess a system’s reliability, which includes its power supply, CPUs, running operating systems, server disk drives and database management systems on all servers, application software, network switching and routing devices, and all network connections
• Determine the amount of planned downtime by performing a thorough audit of all maintenance activities
• Estimate the hourly costs of data outage, to include impact on labor, revenue, damaged reputation to the business and brand loyalty, impact on financial performance, and associated expenses
• Labor productivity: Determine to what level and how many employees were affected by past outages and use that assessment to guide future costs of data downtime
• Determine the loss of revenue resulting from the data loss, taking into account gross annual revenue, total annual business hours, and the total number of hours of downtime
• Calculate the loss due to damaged reputation and brand loyalty; this can be achieved by determining how many customers are expected to defect to a competitor
• Assess financial performance and intangible costs; this includes everything from determining late delivery surcharges and added overtime pay, to damage to reputation, impact on stock price, erosion of the revenue stream, and the development of a damage-control campaign reassure present and future customers
• Time-dependent costs need to be assessed as well to determine a more exact impact on lost productivity
• Compliant readiness and downtime also need to be factored into the overall impact on downtime. Information needs to be readily available to regulators and penalties need to be assessed and avoided due to unplanned downtime
In the end, downtime due to data loss or breach can have serious consequences. Knowing how to mitigate data loss, being proactive in protecting hardware and software, and responding quickly to any data loss or breach are key to keeping downtime to a minimum, and assessing damage should the occasion arise.
