If You Think a Maintenance Plan is Expensive, Try a Day of Unplanned Downtime.
Anyone who is an Advanced Network Systems customer, or prospective customer, quickly realizes that our staff places a great deal of emphasis on the importance of our maintenance support programs.
You may wonder why we spend a lot of time advocating this service. The reason is simple. There are very few organizations in existence today whose cash flow isn't tied to some IT related service or system. At the same time, unplanned hardware downtime can happen at any time, including when it will do the most damage. When critical network equipment, like a switch or telephone system, is down during your business hours orders can stop, people and operations can sit idle and important data can be lost. And when the resulting downtime lasts for hours, a day or even longer, the consequences can be costly and detrimental.
A maintenance support plan provides a proactive solution to ensure the uptime of critical network systems. And in cases where a major failure does occur, the prioritized service and advance replacement features it provides, also minimizes the risks and costs of getting your systems back up and running.
Time and time again, we have seen where system downtime and emergency remediation ultimately ends up costing many multiples of what a maintenance support program would have been.
If this is true, then why is it that many IT managers find it difficult to justify investments in business resilience, like maintenance support, when the risk and costs of downtime are so high? One reason is because when push comes to shove in the battle for budget, IT managers are under a tremendous amount of pressure to only include items that clearly demonstrate a financial return on investment. The other reason is because the risks and costs of business resiliency, and the role of IT, aren't well understood.
Despite advances in technology robustness, occasional hardware downtime is unavoidable. There are options for reducing downtime, but none of them are free. So, organizations have to determine whether options, like maintenance support, are worth the cost given the financial impact of downtime. Average downtime costs vary considerably across industries, but they can also vary significantly within industries. Business size is the most obvious factor, but it’s not the only one. For instance, companies that can revert to manual processing can continue to function when their systems are unavailable, although usually at a significantly lower level of activity. In contrast, other companies, such as online retailers, can’t conduct ANY business during system downtime.
In order for an organization to understand the full financial impact of downtime, they need to examine the various subcomponents of their downtime costs: revenue, human resources, regulatory and compliance, remedial and reputation impact.
Many organizations have become so dependent on IT that an unavailable system totally idles a significant portion of the company.
Almost all companies use IT to record sales. Some organizations may still be able to take and fulfill orders manually. However, most organizations can no longer complete the sales process when their systems are down. If IT downtime causes a disruption in the sales process where customers have a high level of expectation in responsiveness (i.e., medical services or overnight delivery), the business may be exposed to damages coming from the inability to deliver. On the other hand, financial value lost when loyal (or potentially loyal) customers switch to a competitor is more than just the value of the purchases that would have been made at that time. It can sometimes amount to the lifetime purchases those customers might have made.
Human Resource Impact
Another significant downtime cost is lost employee productivity. This can be measured in terms of the salaries, wages and benefits of idled people. If, for example, the work of 1,000 people earning an average of $60 per hour, including benefits, depends on a system that becomes unavailable for one hour, the value of the lost productivity can be estimated as $60,000 for that hour. The estimate could be somewhat lower if some employees are still able to do a portion of their work manually or switch to tasks that require only systems that are still available. But many organizations have become so dependent on IT that an unavailable system totally idles a significant portion of the company. For instance, what happens when email goes down? Or what happens to your VoIP based business phone system, when the LAN goes down?
Regulatory and Contract Compliance Impact
Increasingly stringent regulations require organizations to safeguard the availability, reliability and privacy of financial, human resources and customer data. In addition to government regulations, many companies now include service level agreements in the contracts they sign with their customers and business partners. Failure to fulfill the conditions of an SLA can lead to the imposition of substantial penalties. In addition, the regulatory and contractual fines that may result from an inability to perform business functions vary widely, but can be substantial.
After a downtime event, remedial actions are often required to repair the damage. For example: the cost to have IT systems brought back up to operation at emergency service rates, the cost of potential employee overtime or temporary staff. And, if your customer satisfaction was damaged, a costly special marketing program might be necessary to win back customers.
Companies that miss deadlines, are unable to answer calls or fulfill orders because their systems are unavailable can quickly lose the confidence of customers and potential customers. The prevalence of online forums and social networking venues increases probability that any damage to a company’s reputation will spread widely and rapidly.
Once all of the financial impact subcomponents have been analyzed, adding them up to derive a total hourly downtime cost is simple. Multiplying this value by an estimate of the annual hours of downtime provides a projection of the impact that downtime will have on an organization’s profit for the year.
Business Downtime is Not Inevitable
Unlike system downtime, extended periods of business downtime are not inevitable. When you need it, a maintenance support package, is a reasonably priced insurance policy for your network. In terms of business protection, they can be as invaluable as the other insurance policies you hold for your organization. But they aren’t free. The only way to make a sound decision on how much a maintenance support program is worth is to have a clear picture of the financial impact and exposure that downtime has on your organization’s bottom line.
Advanced Network Systems has extensive experience in helping organizations mitigate their downtime risks and can help you get a better idea of what these costs are for your organization. Try our Downtime Cost Calculator tool.