Welcome!

Microservices Expo Authors: Liz McMillan, Jyoti Bansal, Yeshim Deniz, Dan Blacharski, Elizabeth White

Related Topics: Microservices Expo, Java IoT, Agile Computing, Cloud Security

Microservices Expo: Article

Determining the Cost of Downtime

Determining the cost of downtime is not only application dependent

Last week's Joyent outage brought us thinking how many IT teams make the effort what is the meaningful downtime that will not have significant impact on their business. In this post I will not discuss this particular outage although it is a yet another good example for improving the IT practices and processes but will concentrate on an important step in the Business Impact Analysis (BIA) that is a prerequisite for Disaster Recovery - namely the Cost of Downtime.

Very often because the lack of understanding of the overall IT application portfolio the cost of downtime is calculated using made up numbers or numbers for the whole company. Each application must be considered separately and the analysis must be done per application - there is no one size fits all. For now though let's take a simple example: company that has a revenue of $5o0M and 1500 employees and experiences outage that impacts 50% of it's employees and 30% of their revenue during the downtime.

The first thing you need to do in order to calculate the cost per hour of downtime is to calculate the labor cost per hour. Let's assume that the annual benefits per employee for our fictitious company are $75k and each employee works on average 1,920h per year (assuming 2 weeks vacation and 10 holidays per year). The hourly labor cost for the company will be:

1500 employees X $75K = $112.5M / 1920h = ~$58,600

Because we previously said that only 50% of the employees will be affected the cost per our of downtime will be:

$58,600 X 50% = $29,300

The next thing that you need to do is to calculate the revenue loss per hour of downtime. Another assumption that we need to make here is that our company generates revenue 5 days a week and it is closed only for the holidays, which means that the company generates revenue 2,000 a year. From here our calculation is:

$500M / 2,000h = $250K/h

and we need to multiply this by 30% assumed loss of revenue:

$250K * 30% = $75,000

The total loss to our company for one hour of downtime is determined by combining both numbers above:

$58,000 labor loss per our + $75,000 revenue loss per hour = $133,000

However we do not stop here! Our ultimate goal is to determine how much downtime can we afford for this application. And for that you need to some more financial calculations, which involve not only the revenue but also the profits unless you want to wipe out all the profits with this one downtime. Let's assume that the company's profits are 10% and management decided that the acceptable loss of profits from availability issues with this particular application is 0.1%:

$1B * 10% profits = $100M * 0.1% = $100,000

Dividing both numbers (acceptable loss and cost of downtime per hour) gives us the maximum tolerable downtime (MTD) for the application:

$100,000 / $133,000 = ~0.75 * 60 mins = ~45 min

If you are curious such application must have uptime of 99.991445% in order to satisfy the above requirements.

The overall lesson here is that determining the cost of downtime is not only application dependent but also requires a solid knowledge of the company financials and therefore good collaboration between IT and business owners.

More Stories By Toddy Mladenov

Toddy Mladenov has more than 15 years experience in software development and technology consulting at companies like Microsoft, SAP and 3Com. Currently he is a CTO of Agitare Technologies, Inc. - a boutique consulting company that specializes in Cloud Computing and Big Data Solutions. Before Agitare Tech Toddy spent few years with PaaS startup Apprenda and more than six years working on Microsft's cloud computing platform Windows Azure, Windows Client and MSN/Windows Live. During his career at Microsoft he managed different aspects of the software development process for Windows Azure and Windows Services. He also evangelized Microsoft cloud services among open source communities like PHP and Java. In the past he developed enterprise software for German's software giant SAP and several startups in Europe, and managed the technical sales for 3Com in the Balkan region.

With his broad industry experience, international background and end-user point of view Toddy has an unique approach towards technology. He believes that technology should be develop to improve people's lives and is eager to share his knowledge in topics like cloud computing, mobile and web development.

@MicroservicesExpo Stories
Today we can collect lots and lots of performance data. We build beautiful dashboards and even have fancy query languages to access and transform the data. Still performance data is a secret language only a couple of people understand. The more business becomes digital the more stakeholders are interested in this data including how it relates to business. Some of these people have never used a monitoring tool before. They have a question on their mind like “How is my application doing” but no id...
Is your application too difficult to manage? Do changes take dozens of developers hundreds of hours to execute, and frequently result in downtime across all your site’s functions? It sounds like you have a monolith! A monolith is one of the three main software architectures that define most applications. Whether you’ve intentionally set out to create a monolith or not, it’s worth at least weighing the pros and cons of the different architectural approaches and deciding which one makes the most s...
Developers want to create better apps faster. Static clouds are giving way to scalable systems, with dynamic resource allocation and application monitoring. You won't hear that chant from users on any picket line, but helping developers to create better apps faster is the mission of Lee Atchison, principal cloud architect and advocate at New Relic Inc., based in San Francisco. His singular job is to understand and drive the industry in the areas of cloud architecture, microservices, scalability ...
When you decide to launch a startup company, business advisors, counselors, bankers and armchair know-it-alls will tell you that the first thing you need to do is get funding. While there is some validity to that boilerplate piece of wisdom, the availability of and need for startup funding has gone through a dramatic transformation over the past decade, and the next few years will see even more of a shift. A perfect storm of events is causing this seismic shift. On the macroeconomic side this ...
Cloud promises the agility required by today’s digital businesses. As organizations adopt cloud based infrastructures and services, their IT resources become increasingly dynamic and hybrid in nature. Managing these require modern IT operations and tools. In his session at 20th Cloud Expo, Raj Sundaram, Senior Principal Product Manager at CA Technologies, will discuss how to modernize your IT operations in order to proactively manage your hybrid cloud and IT environments. He will be sharing be...
Cloud Expo, Inc. has announced today that Aruna Ravichandran, vice president of DevOps Product and Solutions Marketing at CA Technologies, has been named co-conference chair of DevOps at Cloud Expo 2017. The @DevOpsSummit at Cloud Expo New York will take place on June 6-8, 2017, at the Javits Center in New York City, New York, and @DevOpsSummit at Cloud Expo Silicon Valley will take place Oct. 31-Nov. 2, 2017, at the Santa Clara Convention Center in Santa Clara, CA.
A Man in the Middle attack, or MITM, is a situation wherein a malicious entity can read/write data that is being transmitted between two or more systems (in most cases, between you and the website that you are surfing). MITMs are common in China, thanks to the “Great Cannon.” The “Great Cannon” is slightly different from the “The Great Firewall.” The firewall monitors web traffic moving in and out of China and blocks prohibited content. The Great Cannon, on the other hand, acts as a man in the...
To more closely examine the variety of ways in which IT departments around the world are integrating cloud services, and the effect hybrid IT has had on their organizations and IT job roles, SolarWinds recently released the SolarWinds IT Trends Report 2017: Portrait of a Hybrid Organization. This annual study consists of survey-based research that explores significant trends, developments, and movements related to and directly affecting IT and IT professionals.
NHK, Japan Broadcasting, will feature the upcoming @ThingsExpo Silicon Valley in a special 'Internet of Things' and smart technology documentary that will be filmed on the expo floor between November 3 to 5, 2015, in Santa Clara. NHK is the sole public TV network in Japan equivalent to the BBC in the UK and the largest in Asia with many award-winning science and technology programs. Japanese TV is producing a documentary about IoT and Smart technology and will be covering @ThingsExpo Silicon Val...
In his general session at 19th Cloud Expo, Manish Dixit, VP of Product and Engineering at Dice, discussed how Dice leverages data insights and tools to help both tech professionals and recruiters better understand how skills relate to each other and which skills are in high demand using interactive visualizations and salary indicator tools to maximize earning potential. Manish Dixit is VP of Product and Engineering at Dice. As the leader of the Product, Engineering and Data Sciences team at D...
Keeping pace with advancements in software delivery processes and tooling is taxing even for the most proficient organizations. Point tools, platforms, open source and the increasing adoption of private and public cloud services requires strong engineering rigor – all in the face of developer demands to use the tools of choice. As Agile has settled in as a mainstream practice, now DevOps has emerged as the next wave to improve software delivery speed and output. To make DevOps work, organization...
Enterprise architects are increasingly adopting multi-cloud strategies as they seek to utilize existing data center assets, leverage the advantages of cloud computing and avoid cloud vendor lock-in. This requires a globally aware traffic management strategy that can monitor infrastructure health across data centers and end-user experience globally, while responding to control changes and system specification at the speed of today’s DevOps teams. In his session at 20th Cloud Expo, Josh Gray, Chie...
This recent research on cloud computing from the Register delves a little deeper than many of the "We're all adopting cloud!" surveys we've seen. They found that meaningful cloud adoption and the idea of the cloud-first enterprise are still not reality for many businesses. The Register's stats also show a more gradual cloud deployment trend over the past five years, not any sort of explosion. One important takeaway is that coherence across internal and external clouds is essential for IT right n...
Back in February of 2017, Andrew Clay Schafer of Pivotal tweeted the following: “seriously tho, the whole software industry is stuck on deployment when we desperately need architecture and telemetry.” Intrigue in a 140 characters. For me, I hear Andrew saying, “we’re jumping to step 5 before we’ve successfully completed steps 1-4.”
In his session at 20th Cloud Expo, Scott Davis, CTO of Embotics, will discuss how automation can provide the dynamic management required to cost-effectively deliver microservices and container solutions at scale. He will discuss how flexible automation is the key to effectively bridging and seamlessly coordinating both IT and developer needs for component orchestration across disparate clouds – an increasingly important requirement at today’s multi-cloud enterprise.
In large enterprises, environment provisioning and server provisioning account for a significant portion of the operations team's time. This often leaves users frustrated while they wait for these services. For instance, server provisioning can take several days and sometimes even weeks. At the same time, digital transformation means the need for server and environment provisioning is constantly growing. Organizations are adopting agile methodologies and software teams are increasing the speed ...
Software as a service (SaaS), one of the earliest and most successful cloud services, has reached mainstream status. According to Cisco, by 2019 more than four-fifths (83 percent) of all data center traffic will be based in the cloud, up from 65 percent today. The majority of this traffic will be applications. Businesses of all sizes are adopting a variety of SaaS-based services – everything from collaboration tools to mission-critical commerce-oriented applications. The rise in SaaS usage has m...
The proper isolation of resources is essential for multi-tenant environments. The traditional approach to isolate resources is, however, rather heavyweight. In his session at 18th Cloud Expo, Igor Drobiazko, co-founder of elastic.io, drew upon his own experience with operating a Docker container-based infrastructure on a large scale and present a lightweight solution for resource isolation using microservices. He also discussed the implementation of microservices in data and application integrat...
We'd all like to fulfill that "find a job you love and you'll never work a day in your life" cliché. But in reality, every job (even if it's our dream job) comes with its downsides. For you, the constant fight against shadow IT might get on your last nerves. For your developer coworkers, infrastructure management is the roadblock that stands in the way of focusing on coding. As you watch more and more applications and processes move to the cloud, technology is coming to developers' rescue-most r...
2016 has been an amazing year for Docker and the container industry. We had 3 major releases of Docker engine this year , and tremendous increase in usage. The community has been following along and contributing amazing Docker resources to help you learn and get hands-on experience. Here’s some of the top read and viewed content for the year. Of course releases are always really popular, particularly when they fit requests we had from the community.