Cost of Downtime
The cost of downtime is what an outage costs you per hour: lost revenue while you are down, plus the engineering time spent firefighting, scaled by how long the outage lasts.
also: downtime cost · cost of an outage · revenue per hour
A first-order estimate divides annual revenue by 8,760 hours to get revenue per hour, then applies the fraction actually at risk while you are down (not all revenue stops the instant a service degrades), and adds the hourly cost of the people pulled into the incident. Multiply by outage length and you have a number the business understands.
That number is the lever for every reliability decision. It tells you what an extra nine is worth: if an hour down costs $40,000 and moving from 99.9% to 99.99% removes about 39 minutes of exposure a month, the upgrade is worth roughly $26,000 a month before you count reputation and churn. Reliability work that costs less than that is an easy yes; work that costs more needs a different justification.
faq
Questions & answers
- How do you calculate the cost of downtime?
- Revenue per hour (annual revenue divided by 8,760) times the share of revenue at risk during an outage, plus the hourly cost of the engineers responding, times the outage duration. Add softer costs like churn and reputation separately, since they are real but harder to pin to one incident.
- Why estimate downtime cost at all?
- Because it converts reliability from a judgement call into a budget. Once you know what an hour down costs, you can price each extra nine of availability and decide which reliability investments pay for themselves and which do not.
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