The Cost of (Un)Availability

Availability
The level of Availability required by the business influences the overall cost of the Service
provided. In general, the higher the level of Availability required by the business the higher the
cost. These costs are not just the procurement of the base technology and Services required to
underpin the Infrastructure. Additional costs are incurred in providing the appropriate Service
Management processes, systems management tools and high Availability solutions required to
meet the more stringent Availability requirements.

When considering how the Availability requirements of the business are to be met, it is important
to ensure that the level of Availability to be provided for a Service is at the level actually required
and is affordable and cost justified by the business. The figure below indicates the products and
services required to provide varying levels of Availability and the cost implications.

The relationship between levels of Availability and overall cost

New Services
Where new Services are being developed it is essential that Availability Management takes an
early and participating Role in determining the Availability requirements. This enables
Availability Management to positively influence the design of the Infrastructure to ensure that it
can deliver the level of Availability required.

The importance of this participation early in the design of the Infrastructure cannot be
underestimated. The benefits of this early involvement are:
a) provides an early indication of the costs required to meet the Availability requirement
b) where costs are seen as too high, enables alternative options with their associated costs and
consequences to be presented to the business
c) higher levels of Availability can be achieved when Availability is designed in, rather than
added on
d) avoids the costs and delays of late design Changes to meet the required levels of
Availability
 e) ensures the Infrastructure design will deliver the required levels of Availability.

Existing Services
Changing business needs and consumer demand may require the levels of Availability provided
for the Service to be reviewed. Such reviews should form part of the regular service reviews with
the business undertaken by Service Level Management.

Where high levels of Availability are already being delivered it may take considerable effort and
incur significant cost to achieve a small incremental Availability improvement. A key activity for
Availability Management is to continually look at opportunities to optimize the Availability of the
Infrastructure. The benefits of this approach being that enhanced levels of Availability may be
achievable but with much lower costs.

The optimization approach is a sensible first step to delivering better value for money. A number
of Availability Management techniques can be applied to identify optimization opportunities. It is
recommended that the scope should not be restricted to a particular Infrastructure, but also include
a review of the Business process and other end-to-end business owned responsibilities. As
illustrated in the figure below, there is a significant increase in costs when the business requirement
is higher than the optimum level of Availability that the Infrastructure can deliver. These increased
costs are driven by major redesign of the Infrastructure and the changing of requirements for the
support organization.

Going beyond optimum Availability significantly impacts costs

Information relating to Changes in Availability requirements and the associated costs should be
included in the Availability Plan. If the business has an urgent need to progress this enhanced level
of Availability an exception report should be produced as the basis for an initial business case.

Unavailability
The overall costs of a Service are influenced by the levels of Availability required and the
investments required in technology and services provided by the support organization to meet this
requirement. Availability certainly does not come for free. However, it is important to reflect that
the Unavailability of any service also has a cost .....therefore Unavailability isn't for free either.
For highly critical business systems it is necessary to consider not only the cost of providing the
service but also the costs that are incurred from failure. The optimum balance to strike being the
cost of the Availability solution weighed against the costs of Unavailability.
How much does a failure cost?
Impact on vital Business functions
The cost of a failure could simply be expressed as the number of business transactions impacted,
either as an actual figure (derived from instrumentation) or based on an estimation. When
measured against the vital business functions that support the business operation this can provide
an obvious indication of the consequence of failure.

The advantage of this approach is the relative ease of obtaining the impact data and the lack of any
complex calculations. It also becomes a 'value' that is understood by both the business and the
technology organization. This can be the stimulus for identifying improvement opportunities and
can become a key Metric in monitoring the Availability of the Service. The major disadvantage
of this approach is that it offers no obvious monetary value that would be needed to justify any
significant financial investment decisions for improving Availability.

The monetary impact

Where significant financial investment decisions are required it is better to express the cost of
failure arising from System, application or function loss to the business as a monetary 'value'.
The monetary value can be calculated as a combination of the tangible costs associated with failure,
but can also include a number of intangible costs. The monetary value should also reflect the cost
impact to the whole organization, i.e. the business and the technology organization.

Tangible costs
These can include:
i) lost User productivity
ii) lost staff productivity
iii) lost revenue
iv) overtime payments
v) wasted goods and material
vi) imposed fines or penalties.

These costs are often well understood by the finance area of the business and the technology
organization and in relative terms are easier to obtain and aggregate than the intangible costs
associated with a failure.

Intangible costs
These can include:
i) loss of Customer goodwill (Customer dissatisfaction)
ii) loss of Customers
iii) loss of business opportunity (to sell, gain new Customers etc.)
iv) damage to business reputation
v) loss of confidence in the Service provider
vi) damage to staff morale.

It is important not to simply dismiss the intangible costs (and the potential consequences) on the
grounds that they are difficult to measure.
The benefit of understanding the cost of Unavailability
The major benefit provided is that it provides a true financial cost on the consequences of
Unavailability and therefore provides an objective view of any 'cost versus benefit' assessment. In
organizations where decision-makers invariably have to consider the 'bottom line' this provides
them with information that should facilitate sensible and informed decisions. The importance of
understanding the cost of Unavailability should be highlighted as a key performance indicator
within the design and operational phases of Service Level Management.

Problems with deriving a cost of Unavailability

There are however some problems to consider and overcome with this approach, namely:
i) the wide scope of what can be factored into the cost calculation
ii) the difficulties of quantifying the cost impact of many of the intangible consequences
iii) resistance from the business to divulging cost information (concerns about how the the
technology organization use information, i.e. lowered Priority if cost is low or continued
approaches to invest if costs are high)
iv) reluctance of the technology organization to disclose and make public the service costs of
each of their business Customers
v) the time and effort of obtaining the cost impact data.

A pragmatic approach is recommended and the level to which an attempt is made to quantify the
monetary cost of a failure is invariably influenced by the cost investment to be justified.

The Hidden Costs of Application Unavailability

When a technology application or system goes down, it can be fairly easy to calculate the cost in
terms of lost productivity, support, and the effects on the bottom line (missed service level
agreements). But what about the hidden costs that don’t show up on the balance sheet? Most of us
don’t even think about those because they don’t have a “real” line-item number associated with
them, but they can actually be far more costly than the financial figures associated with system
failures. Let’s look at some of the short-term and long-term costs of application unavailability.

One of the major negative effects of technology problems is loyalty. These don’t show up in annual
reports, but repeated failures – or even one catastrophic event – can erode confidence in a
technology company’s brand. And while this is a “soft cost,” decreased loyalty can have a
profound effect on a company’s health over time as disappointed users moved to other systems
that are perceived as more reliable.

In addition to the physical costs of fixing a technology problem, there is also the human cost of
employees not working and systems are down. Imagine a 50-person HR department in a large
company not being able to access its payroll systems for two days because of IT failure. That adds
up to 800 hours of lost productivity. That is sure to grab the attention of the leadership team of the
organization even if they are not involved in the technology side. No Chief Executive Officer
(CEO) or Chief Finance Officer (CFO) wants to learn that he or she has paid employees a lot of
money to sit at their desks because their technology applications failed.

There are many other hidden costs associated with technology outages, including the human cost
of troubleshooting, dealing with the backlash of determining root causes of system outages, and
designing ways to eliminate problems. But the most important hidden cost is customer trust
especially in the Internet world where customers expect 100% uptime. Simply put, organizations
just want their technology to work without having to think about it. Frequent or prolonged outages
can destroy trust and cause organizations to look for alternate solutions. That’s why it is critical
for technology companies to design software that not only meets the customer need but also
provides the reliability that they need to do their jobs.

Avoiding The Cost of Unavailability

What are the key steps to maintaining high system availability?" The answer is "Manage change
more effectively". In this converged world where multiple technologies and services are heavily
intertwined, the possibility of the unknown increases substantially. Combine this with human error
and external factors which cannot be controlled and you will never achieve 100% “Managed”
Change. However, there are key steps beyond the standard Change processes you can take which
will make a real difference and move you closer to the 100% target. These steps are:
a) Review downtime on a regular basis and ensure major incident reporting is completed for
each and every service outage.
b) Empower your teams to challenge and engage during the review.
c) With your team, map out lost effort, cost and revenue and publish the results within your
teams and service providers.
d) Identify key areas of concern and engage with service owners or providers.
e) As a manager you must create an environment in which change is simple to understand and
efficient in its execution.
f) Enablement is key; listen to feedback and interpret the needs of the team.
g) Facilitate the required changes to improve and move forward.
h) Above all else, involve the people.
i) Align employees’ remuneration plans to the human governance of Change. As an example,
offer a quarterly bonus to employees who pre-empt and alert instances of unmanaged
change.
j) Promote Change leaders and encourage them to touch more and inspire others. The cost of
these bonuses will significantly outweigh the tangible and intangible costs of
unavailability.
k) Publish to your teams the positive impact improved Change Management has made,
demonstrate the reduction in operational overheads and costs of managing downtime.
Translate this into positive whitespace time such as employee study time and training.
Publish to the business the story of success and how technology has improved availability.
It’s in your hands, you can make a difference starting today.