How much does an hour of IT system downtime cost your company

The cost of IT downtime is the strongest argument in discussions with management, yet few actually calculate it. The formula is simple, and the data is already in your accounting department.

TL;DR — Key highlights

• Basic calculation: lost productivity + lost revenue + recovery costs.
• Indirect costs (reputation, delays, contractual penalties) are often greater than direct ones.
• Perform the calculation by process, not for the company as a whole.
• Once you know the number, the investment decision is simple.

How to calculate

For productivity, take the number of affected employees, their average hourly cost, and the percentage of work they cannot perform during the outage. For revenue, estimate the share of orders or production that is not executed during this time and how much can be recovered later.

Recovery includes overtime, external help, potential penalties, and data re-entry. Re-entry is often the largest item in longer outages, as it takes days after the systems are restored.

Why the number matters

Investment is evaluated based on the risk it eliminates.

• Comparing the cost of a measure and the expected damage is understandable to any management.
• Enables ranking measures by actual impact.
• Helps in defining RTOs that are not just wishful thinking.
• Provides a basis for cyber insurance decisions.

How to get started — recommended procedure

1. Select the three most critical processes.
2. For each, estimate the number of affected people and the hourly cost.
3. Estimate lost hourly revenue and the portion that cannot be recovered.
4. Add recovery costs and potential penalties.
5. Calculate the cost of an hour, a day, and a three-day outage.
6. Compare it with the annual cost of measures that eliminate the risk.

Calculation example for a company with 40 employees

Most common mistakes

The most common mistake is using gross salary instead of total labor cost and calculating for the entire company even though the outage only affects some employees.

The second mistake is omitting the restart phase. After a long outage, the company does not immediately operate at full speed — the backlog is cleared over several days.

How VitalIT helps

At VitalIT, we help with the calculation and then with measures that actually reduce risk. Check out IT consulting and IT support.

Related: Business Continuity Plan and IT system monitoring.

Frequently Asked Questions (FAQ)

Which measures reduce the cost of downtime the most?

Monitoring with early warning, redundant internet connection, tested backup, and clear procedures.

Is redundancy always sensible?

Only where the cost of downtime exceeds the cost of duplication. Therefore, calculation is the first step.

How to estimate reputation loss?

Qualitatively, through the probability of losing a client; in B2B, it often shows up during the next tender.

Does cyber insurance cover downtime?

Some policies cover business interruption but require proof of basic controls.

How often should the calculation be repeated?

Once a year during budget preparation.