Q

How to calculate the cost of downtime

How do I calculate the cost of downtime? Is this something I can figure or do I need to hire someone to do an assessment?

It is very difficult to precisely calculate the complete cost of downtime. There are both direct and indirect factors that combine to make up this figure.

Direct factors include:

  • Cost of carrying idled employees (or consultants)

  • Cost of overtime for previously idled employees so they can make deadlines

  • Slipped or missed deadlines

  • Lost or deferred or lost revenue

  • Government fines or charges

  • Losses due to litigation

  • Lost market opportunities

Indirect factors include:

  • Customer satisfaction

  • Reputation

  • Image of your team/workgroup/division/enterprise/industry

  • Helping out the competition

  • Lost customers

  • Bad press

  • Decline in stock price

  • Decline in employee morale

The selection of which factors apply to your enterprise depend on the type of enterprise you manage. I'm sure that with a little thought, you could put together a list of factors, both direct and indirect, that apply precisely to your enterprise's operations.

Be sure that when you calculate downtime, you add time at the end, even after the systems are up, for affected users to learn of the recovery, and to get back to work.

I hope this helps. If you have more questions, don't hesitate to follow up.

Good luck!

This was first published in May 2003

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