Posted by Amanda at Varay on Apr 30, 2020 12:40:45 PM

Business owner looking over budgets and expenses to find ways to save money | Varay Managed IT, San Antonio & El PasoAs the recent COVID-19 pandemic continues to hurt the global economy, businesses everywhere, including Varay, are sharpening pencils, cutting costs, and checking off the “back-burner” tasks that we’ve been meaning to get done but never got around to.

Unless you had a gigantic influx of cash that you had no need for, you probably decided you need to make drastic budget cuts. Or watch your spending. 

Or sell a kidney.

We believe in empowering fiscal responsibility, but network maintenance is not the right place to cut costs. Why? Because network downtime costs are much higher than you think. In this blog post, we’ll show you why, and how you can accurately calculate downtime costs to make an informed decision on what’s best for your budget.

How network downtime costs waste more money than maintenance services.

We’re not saying this to scare you into hiring an IT manager. There is an actual formula for calculating downtime costs, and the numbers are staggering:

IT Downtime Formula

Hourly Cost of Downtime = Revenue Loss + Productivity Loss + Recovery Costs + Intangible Costs

Revenue Loss

You know that website downtime costs you sales, but do you have an accurate number for your revenue loss? Here’s a simple equation to calculate your hourly revenue loss: 

  • Revenue (per hour) x downtime (in hours) x uptime dependency (%) = total revenue loss

Your uptime dependency is the percentage of your revenue that depends on your operational network. Here’s an example. An online shop that solely relies on website orders has a 100% uptime dependency, whereas a shop with a physical location and an online store could have an uptime dependency of 40%.  

Productivity Loss

Female employee confused and frustrated by network downtime as she can no longer be productive | Varay Managed IT, San Antonio & El PasoNetwork downtime doesn’t just cost you your employee’s hourly rates. It disrupts their workflow and costs additional time for them to refocus on what they were doing once the network is restored.  

Here’s a formula to accurately calculate your productivity loss for each employee:

  •  Employee’s hourly rate (whether the employee is hourly or salaried) x utilization rate (%) = productivity loss per employee

The utilization rate is similar to the uptime dependency rate: it’s the percentage that your employees depend on an operational network to get their work done. Once you have your productivity losses for each of your employees, add them all together to calculate your total productivity loss. 

Recovery Costs

We don’t have a formula for calculating recovery costs, as these are usually specific to your recovery circumstances, but to give you an idea of the costs in this category, here are some common factors that add to recovery costs:

  • Repair services
  • Data loss/recovery services 
  • Equipment replacement costs

Intangible Costs

This final category of the IT downtime formula encompasses the downtime costs and damages that affect your business in the long-term. 

As an example, companies that experience frequent operational difficulties due to network downtime often incur damage to their brand and reputation, costing them sales and “clean up” costs in the marketing and PR departments.

We don’t want your business to pay for any of these exorbitant costs, and we sincerely hope this article has provided you with applicable knowledge to consider when restructuring your budget. If you’re looking for help in reducing the downtime costs outlined in this article, contact Varay today

Topics: it budget, business insights, business continuity, finance, disaster recovery