It’s happened. You just received a call from one of your IT employees that a server has gone down. It’s non-responsive and nobody knows what caused the problem. What is that down time going to cost you?
The answer is: it depends.
To calculate how much it costs you when your server goes down, you’re going to need to put on your bean counter’s hat, open up a spreadsheet, and calculate the figures based on a number of factors.
What Kind of Server Went Down?
The first thing you need to know is what kind of server went down. Was it an email server and nothing else? If that’s the case, then your email communications were interrupted. That could be a big problem, though, if you run a support shop that relies heavily on email communication.
Was it a web server that went down? If so, then your website might have been unavailable for a while. That’s almost always a huge a problem, but it’s even worse if you’re running an e-commerce company with no retail outlet.
Was it an analytics server that went down? If so, then your employees can’t crunch numbers to provide you with business-driven intelligence that feed your overall company strategy.
Regardless of which type server was disrupted and down, you will immediately feel the pain in lost opportunity cost as well as employee efficiency. The calculations for determining the exact cost of a down time vary significantly depending on the server’s primary use.
How Long Was the Server Down?
The next question you need to ask before you can calculate the cost of the down time is: how long was the server down? If it was down for just a few minutes, then maybe it’s not even worth calculating the cost of the down time at all. However, if it was down for an hour, three hours, or eight hours, you probably want to know the very painful truth about how much that down time has cost your business.
Calculating the Cost
Once you know the nature of the server and the length of the down time, you can begin to calculate the cost.
If it was a server that employees used, then you want to know how much you paid your employees to essentially do nothing. If the combined salaries of the three people who use that server amount to $300,000 per year and the server was down for two hours and no one could do their jobs, then the calculation is fairly straightforward. Let’s assume that the employees each work 2,000 hours per year. This effectively means that you’re paying each employee $50 per hour. The server was down for two hours, so you lost six “man-hours” because there were three employees who couldn’t do their jobs. At $50 per hour, you lost $300.
If the server was an e-commerce server, then you need to calculate the number of orders lost during the period that the server was down. The best way to do that is to use comparable sales figures from similar time periods. For example, if the server went down on Tuesday from 2PM to 3PM, then look at how much sales your company typically earns on Tuesdays that aren’t holidays between 2PM and 3PM. That’s the cost of the lost business.
If you lost an email server for a while and your company relies heavily on email traffic for customer relations and support, then the cost is a little harder to quantify. In that case, you’ve certainly lost some good will because customers are angry that they didn’t receive prompt replies to their emails. If you know for sure how many customers you’ve lost because of the down time, calculate the income that you would have received if they had remained loyal customers. It will not be a pretty figure.
Keep in mind that all of these calculations don’t even include the cost to fix the server, if any was incurred. You’ll need to include that cost as well.
There is a reason why redundancy is a great idea in engineering. Technical problems can and will occur. In many cases, those problems can be very costly. While it’s great to know what it costs your business when a server goes down, it’s even better to take proactive steps to ensure that you have proper backups.