Annualizing Per Incident Downtime Costs into the Total Annual Cost of Unplanned Downtime

After you have managed to quantify the cost of a typical downtime incident, the next task is to annualize that number into an annual cost of unplanned downtime.

The annual cost of downtime incidents is found by:

1) Calculating the average total cost of a downtime incident, including:

a. IT staff time lost due to downtime

b. revenue lost due to downtime

c. organizational productivity costs due to downtime

d. business reputation lost due to downtime

2) Multiplying by the total number of expected annual downtime incidents.

Projecting the annual number of downtime incidents can be tricky. In our experience, it is reasonable to use:

• the historical number of downtime incidents your IT service experiences
• a forecast number based on internal modeling
• an industry standard number such as the one we found in our IT Operations Research Report: Downtime and other Concerns and included below for your use.

Next Step:

The next step that companies need to take in determining downtime costs is understanding the causes of downtime including the common lack of change management maturity, so you can drive organizational improvement using the resources justified by your in depth cost analysis.

Popularity: 3% [?]

Filed Under: Downtime