Drill down to cost-estimate a potential disaster

by Mike Talon | Sep 16, 2003 7:00:00 AM

Tags: Call centers, Manufacturing, Customer relationship management (CRM), Mike Talon, justification, outage, disaster recovery, call-center

Takeaway: How to figure out what a disaster could cost

This article was originally published in the Disaster Recovery e-newsletter.

Finding the project costs associated with disaster recovery and high availability solutions isn't a terribly difficult task, but justifying these costs can be an absolute nightmare. For example, how does a service organization quantify the cost of downtime for its service center?

Many organizations, such as call centers, can't easily determine how much money they lose during an outage. However, the numbers can be found. The first thing to consider is that most call center employees are paid by the hour and use company resources while on the clock. These resources become vitally important when you can't point directly to lost revenue streams. You can add up the numbers for how much electricity, office space, and other fixed costs will be utilized during an outage.

You can also determine how much you pay employees during this time. Since both the resources and salaries have to be paid, but no work is performed, you immediately have a number you can begin to use as a basis for cost justification.

Beyond that, things become more difficult, but it's no less important in the justification of your DR and HA project budgets. Determining how much money you lose due to client dissatisfaction during an outage takes a great deal of study using consultants and statisticians who specialize in determining how much this dissatisfaction affects future sales. For example, if your products require support staff assistance and that support is not available, customers may be less likely to purchase other products from your company in the future.

Your company may already have statistics on repeat purchasing based on client satisfaction. If so, most of this battle is already won. If you don't have those statistics, you'll either need to get this data or base your budget justification on a fixed-cost analysis. Even though a fixed-cost analysis may work, you'll end up with a number that's much lower than the total you'd get using both analyses together.

Determining losses for a service organization is much easier. Generally speaking, customer service is part of the cost of doing business and what your clients pay for. Clients purchase particular services (by phone, e-mail, etc.) and expect that the services will be available when needed. Downtime in this type of call center results in a loss of continued revenue from clients for that service.

If clients pay on a fee-per-call basis, you have an even easier time figuring out how much the downtime costs you. Understanding how many calls you receive during different periods of the day and how much revenue each call brings into the organization allows you to determine exactly how much revenue is lost during any significant outages.

Call center DR and HA projects are as important as any other project dealing with business continuity planning. However, since DR and HA often involve additional costs, such as staffing, floor space, and phone systems, justifications must be made before additional funds are allocated. Performing due diligence and finding out how much an outage costs the company can greatly shorten the justification process and get you the budget you need to do the job right.