Don't rely on industry averages for cost of downtime


On a weekly basis, I get at least one inquiry request from either a vendor or an end-user company seeking industry averages for the cost of downtime. Vendors like to quote these statistics to grab your attention and to create a sense of urgency to buy their products or services.

Stephanie Balaouras

BC/DR planners and senior IT managers quote these statistics to create a sense of urgency with their own executives who are often loath to invest in BC/DR preparedness because they view it as a very expensive insurance policy.

BC/DR planners, senior IT managers and anyone else trying to build the business case for BC/DR should avoid the use of industry averages and other sensational statistics.

While these statistics do grab attention, more often than not, they are misleading and inaccurate, and your executives will see through them. You'll hurt your business case in the end because you haven't done your homework and your execs will know it.

I saw a study recently that stated the cost of downtime for the insurance industry was $1,202,444 per hour. You might be tempted to grab this statistic and throw it into the next presentation to your C-level exec but what is this statistic really telling you? Do the demographics of the companies in the study match yours? Do you trust the accuracy of the data? Consider the following:

  • What is the definition of insurance industry in this case? Is it companies that focus solely on insurance or does it include companies that also provide financial advice and monetary instruments to their clients?
  • What size companies participated in this study? What were their revenues? How many employees did they have?
  • Where are the companies in this study from? Are they headquartered in North America? Europe? Latin America?
  • Did the companies in this study really know their cost of downtime or was it an estimate? Had the companies conducted a business impact analysis and risk assessment in the last two years?
  • Who within the company responded to the study? Was it a decision-maker or influencer in BC/DR?

It's going to be very difficult to find a study that has a meaningful sample size of companies that match your demographics.

And even if you did find such a study, I would argue that there are still certain demographics and business operations that are unique to your company such as the location of your critical sites, the distribution of your employees across those sites, your revenue mix, and your peak periods.

Next page: Calculate your BC/DR risk

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