Detective Work: Calculate The True Cost Of Bad IT Service

Detective Work

Ask yourself this, How much does disruption to your IT service really cost your business? If the focus of your IT costs has been on spending money on software and hardware infrastructure, you have only scraped the tip of the iceberg. The long-term ongoing costs – support and services – remain unseen, and these can be considerably more. Experts have estimated that 80% of total IT costs occur after initial purchase.

So exactly how much does disruption to your IT service really cost your business? It’s a tricky question to answer precisely.

How To Work It Out

1. You could try estimating the number of hours your employees use trying to fix application or database problems.

2. Add that to the number of hours they spend on training themselves to come up with solutions to get around interruptions in availability – or helping their colleagues to do so.

3. Then multiply the total by the average hourly wage across your company. Or you could hazard a guess at the amount of downtime during the last month and, again, multiply it by the average hourly pay.

If you’re surprised by how quickly the costs add up, even using such rudimentary calculations, you probably need to take a closer look at the impact of bad IT support on your business. If your service is not up to scratch, your business will bleed money in wasted staff time and poor motivation. It can also damage your company’s reputation through interrupted communications and service delivery with partners and customers.

IT Service Affects Everything

Looked at like this, the quality of your IT service is a crucial element in the way your business is perceived by your employees and your customers. It makes sense to invest in IT service that will ensure smooth-running of your IT, while reducing your overheads.

Get it wrong, and the costs will eat away at your profit line.

Dunn & Bradstreet estimates that 59% of Fortune 500 companies experience at least 1.6 hours of downtime every week. With this in mind, it has been calculated that if a company has 10,000 employees who are paid $56 an hour (on average), the labour element of downtime costs alone would be $896,000 weekly.

Scale that down to a SME, and the relative impact will probably be even greater. And while it is easy to generalise – after all, not every member of staff will be affected in the same way when a service or application is unavailable – IT is indisputably the glue that binds and links every department. Disrupted service will impact on everybody’s productivity to a certain degree.

Productivity Perils

In 2011, CA Technologies published a report that looked at the cost of IT downtime on employee productivity to small, medium and large enterprises throughout Europe. The Avoidable Cost of Downtime discovered that UK business lose 300,000 man hours each year to IT downtime – at a cost of £2 billion.

And the time taken to fix a disrupted IT service costs the average British business £208,000. According to CA Technologies’ survey, the average IT outage lasts 9.8 hours in the UK – longer than any other European country – and reduces the ability of the business to make revenue by 22% while it continues.

But that is not the end of the story. Even if applications and damaged databases can be restored to basic functionality relatively quickly, complete data recovery and availability might take longer. Further delays in the restoration of a full service will continue to erode profitability, minute by minute. And small businesses suffer most. During recovery periods, employees will only be able to achieve 57% of their usual productivity levels, compared with 67% in medium-sized companies and 67% in large enterprises.

Getting The Support Right

During the economic downturn, it was only natural that business should often regard IT support services as a prime target for cost control. Keeping them in-house made sense. The trouble is that the minute IT goes wrong, service delivery becomes a major distraction to the very people who are charged with ensuring day-to-day availability. The impact is felt right across the business.

However, increasingly, businesses of every kind and size are seeing the value and benefits of outsourcing their IT service to a partner with the insight and skills to complement the precise requirements of their business.

Learn From The Giants

SMEs should take their lead from large enterprises who, according to Ovum, are starting to drive a resurgence in the UK IT services market. Admittedly, the £7.2 billion worth of new contracts announced during the first five months of 2013 were boosted by a handful of megadeals with industry giants.

But, says Ed Thomas, IT services analyst, the recession has ensured that cost-cutting remains one of the top priorities for most companies, as well as the UK coalition government. This means that demand for IT services will rise – and a cheap service will not be the only criterion for choosing an outsourcing partner.

So how do you quantify the cost of services – and make sure you choose a partner who is competent and in-tune with the requirements and IT priorities of your business?

Five Ways To Cost IT Services

Again, we could look to the large enterprises for guidance that is easily adapted to suit businesses of every size.

In his blog post for CIO.com (Transforming IT to Show Cost of Services), Apptio CEO Sunny Gupta recommends five best practices, based on the input of Fortune 500 CIOs. They can be summarised as follows:

  • Define a services taxonomy which classifies the relationship between each service and department in a clear, logical way
  • Don’t wait for your data to be 100% clean before you embark on any new IT service strategy – it will usually ‘clean itself’ if you get the right combination of service and support in place
  • Make sure all your IT people are proficient in cost accounting, so they understand the value of each related service to the business – and the cost when it becomes unavailable
  • Try out any new IT service or support strategy in discrete areas, such as application or database services
  • Make Technology Business Management pervasive across every aspect of the business via a Technology Strategy Board (TSB), so that its impact is visible to everyone.

Choose The Right Partner

The right IT support services partner will work with you to make sure that your support capability is fully integrated with your business requirements. Understanding the real cost to your business of any disruption to IT availability is half the battle.

Whether your priority is a single, business-critical component of your IT delivery model or a fully outsourced portfolio of services, you need to feel confident in your partner’s ability to help you reduce direct and indirect support costs – and lessen your exposure to the risks of application downtime.

  • Do you know what the cost of bad IT service is to your business?
  • How should you go about finding the right IT services supplier to partner your business?
  • There is never a good time to change IT service supplier – but if you don’t address the issue, your business may leak money and lose its reputation…
Mark Walker

Mark Walker works as a Business Development Director for IT Support, consultancy, information management and application support company, Ubertas. He is focused on developing business through partner channels and on creating and executing sector plans. Mark has a career spanning over 25 years in the field of Services and Systems, including 15 years in Outsourcing and Managed Services. Mark is a Chartered IT Professional and Chartered Engineer with a degree in Electrical & Electronic Engineering, and has worked for major IT and Outsource providers including Siemens, Unisys, Dimension Data and Capita. He commenced working life as a Software and Systems Engineer on large IT projects, and whilst at Siemens transitioned to Sales & Business Development roles. He has since held positions as Sales Manager, Consulting Practice Director, Client Director and Partner Channels Director.