Welcome!

Agile Computing Authors: Elizabeth White, Yeshim Deniz, Pat Romanski, ManageEngine IT Matters, Liz McMillan

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 DXWorldExpo has been named “Global Sponsor” of SYS-CON's 21st International Cloud Expo, which will take place on Oct 31 – Nov 2, 2017, at the Santa Clara Convention Center in Santa Clara, CA. Digital Transformation is the key issue driving the global enterprise IT business. Digital Transformation is most prominent among Global 2000 enterprises and government institutions.
SYS-CON Events announced today that Datera, that offers a radically new data management architecture, has been named "Exhibitor" of SYS-CON's 21st International Cloud Expo ®, which will take place on Oct 31 - Nov 2, 2017, at the Santa Clara Convention Center in Santa Clara, CA. Datera is transforming the traditional datacenter model through modern cloud simplicity. The technology industry is at another major inflection point. The rise of mobile, the Internet of Things, data storage and Big...
"We've been engaging with a lot of customers including Panasonic, we've been involved with Cisco and now we're working with the U.S. government - the Department of Homeland Security," explained Peter Jung, Chief Product Officer at Pulzze Systems, in this SYS-CON.tv interview at @ThingsExpo, held June 6-8, 2017, at the Javits Center in New York City, NY.
SYS-CON Events announced today that Calligo, an innovative cloud service provider offering mid-sized companies the highest levels of data privacy and security, has been named "Bronze Sponsor" of SYS-CON's 21st International Cloud Expo ®, which will take place on Oct 31 - Nov 2, 2017, at the Santa Clara Convention Center in Santa Clara, CA. Calligo offers unparalleled application performance guarantees, commercial flexibility and a personalised support service from its globally located cloud plat...
"We are focused on SAP running in the clouds, to make this super easy because we believe in the tremendous value of those powerful worlds - SAP and the cloud," explained Frank Stienhans, CTO of Ocean9, Inc., in this SYS-CON.tv interview at 20th Cloud Expo, held June 6-8, 2017, at the Javits Center in New York City, NY.
Internet of @ThingsExpo, taking place October 31 - November 2, 2017, at the Santa Clara Convention Center in Santa Clara, CA, is co-located with 21st Cloud Expo and will feature technical sessions from a rock star conference faculty and the leading industry players in the world. The Internet of Things (IoT) is the most profound change in personal and enterprise IT since the creation of the Worldwide Web more than 20 years ago. All major researchers estimate there will be tens of billions devic...
"The Striim platform is a full end-to-end streaming integration and analytics platform that is middleware that covers a lot of different use cases," explained Steve Wilkes, Founder and CTO at Striim, in this SYS-CON.tv interview at 20th Cloud Expo, held June 6-8, 2017, at the Javits Center in New York City, NY.
"We provide IoT solutions. We provide the most compatible solutions for many applications. Our solutions are industry agnostic and also protocol agnostic," explained Richard Han, Head of Sales and Marketing and Engineering at Systena America, in this SYS-CON.tv interview at @ThingsExpo, held June 6-8, 2017, at the Javits Center in New York City, NY.
DX World EXPO, LLC., a Lighthouse Point, Florida-based startup trade show producer and the creator of "DXWorldEXPO® - Digital Transformation Conference & Expo" has announced its executive management team. The team is headed by Levent Selamoglu, who has been named CEO. "Now is the time for a truly global DX event, to bring together the leading minds from the technology world in a conversation about Digital Transformation," he said in making the announcement.
"MobiDev is a Ukraine-based software development company. We do mobile development, and we're specialists in that. But we do full stack software development for entrepreneurs, for emerging companies, and for enterprise ventures," explained Alan Winters, U.S. Head of Business Development at MobiDev, in this SYS-CON.tv interview at 20th Cloud Expo, held June 6-8, 2017, at the Javits Center in New York City, NY.
While the focus and objectives of IoT initiatives are many and diverse, they all share a few common attributes, and one of those is the network. Commonly, that network includes the Internet, over which there isn't any real control for performance and availability. Or is there? The current state of the art for Big Data analytics, as applied to network telemetry, offers new opportunities for improving and assuring operational integrity. In his session at @ThingsExpo, Jim Frey, Vice President of S...
SYS-CON Events announced today that DXWorldExpo has been named “Global Sponsor” of SYS-CON's 21st International Cloud Expo, which will take place on Oct 31 – Nov 2, 2017, at the Santa Clara Convention Center in Santa Clara, CA. Digital Transformation is the key issue driving the global enterprise IT business. Digital Transformation is most prominent among Global 2000 enterprises and government institutions.
In his opening keynote at 20th Cloud Expo, Michael Maximilien, Research Scientist, Architect, and Engineer at IBM, discussed the full potential of the cloud and social data requires artificial intelligence. By mixing Cloud Foundry and the rich set of Watson services, IBM's Bluemix is the best cloud operating system for enterprises today, providing rapid development and deployment of applications that can take advantage of the rich catalog of Watson services to help drive insights from the vast t...
SYS-CON Events announced today that EnterpriseTech has been named “Media Sponsor” of SYS-CON's 21st International Cloud Expo, which will take place on Oct 31 – Nov 2, 2017, at the Santa Clara Convention Center in Santa Clara, CA. EnterpriseTech is a professional resource for news and intelligence covering the migration of high-end technologies into the enterprise and business-IT industry, with a special focus on high-tech solutions in new product development, workload management, increased effic...
SYS-CON Events announced today that Massive Networks, that helps your business operate seamlessly with fast, reliable, and secure internet and network solutions, has been named "Exhibitor" of SYS-CON's 21st International Cloud Expo ®, which will take place on Oct 31 - Nov 2, 2017, at the Santa Clara Convention Center in Santa Clara, CA. As a premier telecommunications provider, Massive Networks is headquartered out of Louisville, Colorado. With years of experience under their belt, their team of...
SYS-CON Events announced today that Cloud Academy named "Bronze Sponsor" of 21st International Cloud Expo which will take place October 31 - November 2, 2017 at the Santa Clara Convention Center in Santa Clara, CA. Cloud Academy is the industry’s most innovative, vendor-neutral cloud technology training platform. Cloud Academy provides continuous learning solutions for individuals and enterprise teams for Amazon Web Services, Microsoft Azure, Google Cloud Platform, and the most popular cloud com...
SYS-CON Events announced today that Cloudistics, an on-premises cloud computing company, has been named “Bronze Sponsor” of SYS-CON's 21st International Cloud Expo, which will take place on Oct 31 - Nov 2, 2017, at the Santa Clara Convention Center in Santa Clara, CA. Cloudistics delivers a complete public cloud experience with composable on-premises infrastructures to medium and large enterprises. Its software-defined technology natively converges network, storage, compute, virtualization, and ...
SYS-CON Events announced today that CHEETAH Training & Innovation will exhibit at SYS-CON's 21st International Cloud Expo®, which will take place on Oct. 31 – Nov 2, 2017, at the Santa Clara Convention Center in Santa Clara, CA. CHEETAH Training & Innovation is a cloud consulting and IT training firm specializing in improving clients cloud strategies and infrastructures for medium to large companies.
SYS-CON Events announced today that Datanami has been named “Media Sponsor” of SYS-CON's 21st International Cloud Expo, which will take place on Oct 31 – Nov 2, 2017, at the Santa Clara Convention Center in Santa Clara, CA. Datanami is a communication channel dedicated to providing insight, analysis and up-to-the-minute information about emerging trends and solutions in Big Data. The publication sheds light on all cutting-edge technologies including networking, storage and applications, and thei...
The current age of digital transformation means that IT organizations must adapt their toolset to cover all digital experiences, beyond just the end users’. Today’s businesses can no longer focus solely on the digital interactions they manage with employees or customers; they must now contend with non-traditional factors. Whether it's the power of brand to make or break a company, the need to monitor across all locations 24/7, or the ability to proactively resolve issues, companies must adapt to...