Posted 7 September, 2016 • by Mary McCoy
Downtime is maddening. It’s not only frustrating, it can kill productivity and business continuity. And it can damage customer relations. These things are costly, yet your IT managed services clients may not realise how expensive downtime can be.
Your customers look to you for advice as well as products and services. You’re the IT experts, and they are not. Often, SME owners don’t consider the fact that even a limited IT failure has a ripple effect throughout their organisation. Or, worse, they believe extended downtime won’t have much of an effect on their business. Why even talk about disaster recovery?
Helping your customers understand the true cost of downtime not only benefits them, it benefits your business as well. Cost calculations give them data and insight they can use to plan more strategically. And showing them the total potential cost of downtime makes an even stronger case for choosing a backup and disaster recovery (BDR) plan and your related services.
Several factors contribute to the total cost of downtime:
Cost of Downtime (per hour) = Lost Revenue + Lost Productivity + Cost to recover + Cost of intangibles (i.e. reputation cost)
Let’s look at each of these elements more closely.
If your client’s business is down, they cannot generate revenue. Follow these steps to calculate that cost:
With that baseline in place, you’ll be able to easily calculate the amount of revenue lost during an outage or downtime event.
When technology isn’t working, people aren’t working. Your customer’s IT team is working, but on non-revenue producing activities such as getting systems back online. But salaries are a fixed cost, so that money is spent no matter what. Follow these steps to calculate that cost of lost productivity:
Clients often forget there are costs associated with recovery itself, so help them make a list of what they may face, such as:
This helps them develop a more effective disaster recovery (DR) plan as well as understand company-wide ramifications of downtime.
Things like loss of their customers’ goodwill are incalculable, but they can be devastating. What if a good customer were to abandon your client as a result of a downtime event? You can calculate their (now lost) lifetime customer value. Brand reputation is a critical business asset for your customers.
Plug your numbers for each component into our initial equation, and there’s your client’s projected total cost of downtime. Likely it’s significantly higher than the cost of hiring your managed services.
Meet Mary! Mary McCoy is a Senior Demand Generation Programs Manager at Continuum, where she's worked for over two years. Mary has consulted with hundreds of partners, lending website, blog and social media support. Before that, she graduated from the University of Virginia (Wahoowa!) with a BA in Economics and served as digital marketing intern for Citi Performing Arts Center (Citi Center), spearheading the nonprofit’s #GivingTuesday social media campaign. Like her school’s founder, Thomas Jefferson, Mary believes learning never ends. She considers herself a passionate, lifelong student of content creation and inbound marketing.