Agile Computing Authors: Liz McMillan, Carmen Gonzalez, Jim Kaskade, Lori MacVittie, Pat Romanski

Related Topics: Microservices Expo, Java IoT, Agile Computing, Cloud Security

Microservices Expo: Article

Determining the Cost of Downtime

Determining the cost of downtime is not only application dependent

Last week's Joyent outage brought us thinking how many IT teams make the effort what is the meaningful downtime that will not have significant impact on their business. In this post I will not discuss this particular outage although it is a yet another good example for improving the IT practices and processes but will concentrate on an important step in the Business Impact Analysis (BIA) that is a prerequisite for Disaster Recovery - namely the Cost of Downtime.

Very often because the lack of understanding of the overall IT application portfolio the cost of downtime is calculated using made up numbers or numbers for the whole company. Each application must be considered separately and the analysis must be done per application - there is no one size fits all. For now though let's take a simple example: company that has a revenue of $5o0M and 1500 employees and experiences outage that impacts 50% of it's employees and 30% of their revenue during the downtime.

The first thing you need to do in order to calculate the cost per hour of downtime is to calculate the labor cost per hour. Let's assume that the annual benefits per employee for our fictitious company are $75k and each employee works on average 1,920h per year (assuming 2 weeks vacation and 10 holidays per year). The hourly labor cost for the company will be:

1500 employees X $75K = $112.5M / 1920h = ~$58,600

Because we previously said that only 50% of the employees will be affected the cost per our of downtime will be:

$58,600 X 50% = $29,300

The next thing that you need to do is to calculate the revenue loss per hour of downtime. Another assumption that we need to make here is that our company generates revenue 5 days a week and it is closed only for the holidays, which means that the company generates revenue 2,000 a year. From here our calculation is:

$500M / 2,000h = $250K/h

and we need to multiply this by 30% assumed loss of revenue:

$250K * 30% = $75,000

The total loss to our company for one hour of downtime is determined by combining both numbers above:

$58,000 labor loss per our + $75,000 revenue loss per hour = $133,000

However we do not stop here! Our ultimate goal is to determine how much downtime can we afford for this application. And for that you need to some more financial calculations, which involve not only the revenue but also the profits unless you want to wipe out all the profits with this one downtime. Let's assume that the company's profits are 10% and management decided that the acceptable loss of profits from availability issues with this particular application is 0.1%:

$1B * 10% profits = $100M * 0.1% = $100,000

Dividing both numbers (acceptable loss and cost of downtime per hour) gives us the maximum tolerable downtime (MTD) for the application:

$100,000 / $133,000 = ~0.75 * 60 mins = ~45 min

If you are curious such application must have uptime of 99.991445% in order to satisfy the above requirements.

The overall lesson here is that determining the cost of downtime is not only application dependent but also requires a solid knowledge of the company financials and therefore good collaboration between IT and business owners.

More Stories By Toddy Mladenov

Toddy Mladenov has more than 15 years experience in software development and technology consulting at companies like Microsoft, SAP and 3Com. Currently he is a CTO of Agitare Technologies, Inc. - a boutique consulting company that specializes in Cloud Computing and Big Data Solutions. Before Agitare Tech Toddy spent few years with PaaS startup Apprenda and more than six years working on Microsft's cloud computing platform Windows Azure, Windows Client and MSN/Windows Live. During his career at Microsoft he managed different aspects of the software development process for Windows Azure and Windows Services. He also evangelized Microsoft cloud services among open source communities like PHP and Java. In the past he developed enterprise software for German's software giant SAP and several startups in Europe, and managed the technical sales for 3Com in the Balkan region.

With his broad industry experience, international background and end-user point of view Toddy has an unique approach towards technology. He believes that technology should be develop to improve people's lives and is eager to share his knowledge in topics like cloud computing, mobile and web development.

@ThingsExpo Stories
SYS-CON Events announced today that Embotics, the cloud automation company, will exhibit at the 19th International Cloud Expo, which will take place on November 1–3, 2016, at the Santa Clara Convention Center in Santa Clara, CA. Embotics is the cloud automation company for IT organizations and service providers that need to improve provisioning or enable self-service capabilities. With a relentless focus on delivering a premier user experience and unmatched customer support, Embotics is the fas...
SYS-CON Events announced today that MathFreeOn will exhibit at the 19th International Cloud Expo, which will take place on November 1–3, 2016, at the Santa Clara Convention Center in Santa Clara, CA. MathFreeOn is Software as a Service (SaaS) used in Engineering and Math education. Write scripts and solve math problems online. MathFreeOn provides online courses for beginners or amateurs who have difficulties in writing scripts. In accordance with various mathematical topics, there are more tha...
SYS-CON Events announced today that Niagara Networks will exhibit at the 19th International Cloud Expo, which will take place on November 1–3, 2016, at the Santa Clara Convention Center in Santa Clara, CA. Niagara Networks offers the highest port-density systems, and the most complete Next-Generation Network Visibility systems including Network Packet Brokers, Bypass Switches, and Network TAPs.
The best way to leverage your Cloud Expo presence as a sponsor and exhibitor is to plan your news announcements around our events. The press covering Cloud Expo and @ThingsExpo will have access to these releases and will amplify your news announcements. More than two dozen Cloud companies either set deals at our shows or have announced their mergers and acquisitions at Cloud Expo. Product announcements during our show provide your company with the most reach through our targeted audiences.
@ThingsExpo has been named the Top 5 Most Influential Internet of Things Brand by Onalytica in the ‘The Internet of Things Landscape 2015: Top 100 Individuals and Brands.' Onalytica analyzed Twitter conversations around the #IoT debate to uncover the most influential brands and individuals driving the conversation. Onalytica captured data from 56,224 users. The PageRank based methodology they use to extract influencers on a particular topic (tweets mentioning #InternetofThings or #IoT in this ...
In his general session at 19th Cloud Expo, Manish Dixit, VP of Product and Engineering at Dice, will discuss how Dice leverages data insights and tools to help both tech professionals and recruiters better understand how skills relate to each other and which skills are in high demand using interactive visualizations and salary indicator tools to maximize earning potential. Manish Dixit is VP of Product and Engineering at Dice. As the leader of the Product, Engineering and Data Sciences team a...
Virgil consists of an open-source encryption library, which implements Cryptographic Message Syntax (CMS) and Elliptic Curve Integrated Encryption Scheme (ECIES) (including RSA schema), a Key Management API, and a cloud-based Key Management Service (Virgil Keys). The Virgil Keys Service consists of a public key service and a private key escrow service. 

OnProcess Technology has announced it will be a featured speaker at @ThingsExpo, taking place November 1 - 3, 2016, in Santa Clara, California. Dan Gettens, OnProcess’ Chief Analytics Officer, will discuss how Internet of Things (IoT) data can be leveraged to predict product failures, improve uptime and slash costly inventory stock. @ThingsExpo is an annual gathering of IoT and cloud developers, practitioners and thought-leaders who exchange ideas and insights on topics ranging from Big Data in...
Data is the fuel that drives the machine learning algorithmic engines and ultimately provides the business value. In his session at Cloud Expo, Ed Featherston, a director and senior enterprise architect at Collaborative Consulting, will discuss the key considerations around quality, volume, timeliness, and pedigree that must be dealt with in order to properly fuel that engine.
In an era of historic innovation fueled by unprecedented access to data and technology, the low cost and risk of entering new markets has leveled the playing field for business. Today, any ambitious innovator can easily introduce a new application or product that can reinvent business models and transform the client experience. In their Day 2 Keynote at 19th Cloud Expo, Mercer Rowe, IBM Vice President of Strategic Alliances, and Raejeanne Skillern, Intel Vice President of Data Center Group and ...
Successful digital transformation requires new organizational competencies and capabilities. Research tells us that the biggest impediment to successful transformation is human; consequently, the biggest enabler is a properly skilled and empowered workforce. In the digital age, new individual and collective competencies are required. In his session at 19th Cloud Expo, Bob Newhouse, CEO and founder of Agilitiv, will draw together recent research and lessons learned from emerging and established ...
There is growing need for data-driven applications and the need for digital platforms to build these apps. In his session at 19th Cloud Expo, Muddu Sudhakar, VP and GM of Security & IoT at Splunk, will cover different PaaS solutions and Big Data platforms that are available to build applications. In addition, AI and machine learning are creating new requirements that developers need in the building of next-gen apps. The next-generation digital platforms have some of the past platform needs a...
I'm a lonely sensor. I spend all day telling the world how I'm feeling, but none of the other sensors seem to care. I want to be connected. I want to build relationships with other sensors to be more useful for my human. I want my human to understand that when my friends next door are too hot for a while, I'll soon be flaming. And when all my friends go outside without me, I may be left behind. Don't just log my data; use the relationship graph. In his session at @ThingsExpo, Ryan Boyd, Engi...
Smart Cities are here to stay, but for their promise to be delivered, the data they produce must not be put in new siloes. In his session at @ThingsExpo, Mathias Herberts, Co-founder and CTO of Cityzen Data, will deep dive into best practices that will ensure a successful smart city journey.
More and more brands have jumped on the IoT bandwagon. We have an excess of wearables – activity trackers, smartwatches, smart glasses and sneakers, and more that track seemingly endless datapoints. However, most consumers have no idea what “IoT” means. Creating more wearables that track data shouldn't be the aim of brands; delivering meaningful, tangible relevance to their users should be. We're in a period in which the IoT pendulum is still swinging. Initially, it swung toward "smart for smar...
19th Cloud Expo, taking place November 1-3, 2016, at the Santa Clara Convention Center in Santa Clara, CA, will feature technical sessions from a rock star conference faculty and the leading industry players in the world. Cloud computing is now being embraced by a majority of enterprises of all sizes. Yesterday's debate about public vs. private has transformed into the reality of hybrid cloud: a recent survey shows that 74% of enterprises have a hybrid cloud strategy. Meanwhile, 94% of enterpri...
Two weeks ago (November 3-5), I attended the Cloud Expo Silicon Valley as a speaker, where I presented on the security and privacy due diligence requirements for cloud solutions. Cloud security is a topical issue for every CIO, CISO, and technology buyer. Decision-makers are always looking for insights on how to mitigate the security risks of implementing and using cloud solutions. Based on the presentation topics covered at the conference, as well as the general discussions heard between sessi...
The Internet of Things can drive efficiency for airlines and airports. In their session at @ThingsExpo, Shyam Varan Nath, Principal Architect with GE, and Sudip Majumder, senior director of development at Oracle, will discuss the technical details of the connected airline baggage and related social media solutions. These IoT applications will enhance travelers' journey experience and drive efficiency for the airlines and the airports. The session will include a working demo and a technical d...
The Internet of Things (IoT), in all its myriad manifestations, has great potential. Much of that potential comes from the evolving data management and analytic (DMA) technologies and processes that allow us to gain insight from all of the IoT data that can be generated and gathered. This potential may never be met as those data sets are tied to specific industry verticals and single markets, with no clear way to use IoT data and sensor analytics to fulfill the hype being given the IoT today.
@ThingsExpo has been named the Top 5 Most Influential M2M Brand by Onalytica in the ‘Machine to Machine: Top 100 Influencers and Brands.' Onalytica analyzed the online debate on M2M by looking at over 85,000 tweets to provide the most influential individuals and brands that drive the discussion. According to Onalytica the "analysis showed a very engaged community with a lot of interactive tweets. The M2M discussion seems to be more fragmented and driven by some of the major brands present in the...