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Cost Justification


“Plan for the worst and hope for the best.”

There are five major reasons why connectivity will fail: excessive heat, poor/bad power, water, fire/smoke, and vandalism/theft

Over heated servers, humidity raised to the point where droplet fall off the equipment like raindrops, the network disappears due to theft or is damaged beyond repair by a disgruntle employee, smoke, dust, dirt and/or grit, fire creates a twisted tangled sculpture that once was the network – these are the threats. What is at stake is the interrupted service to the operation, replacement of the equipment and the cost of rebuilding the network at that location.

If some disastrous or diabolic event happens what’s would this mean? As one esteem colleague who had spent over thirty years overseeing worldwide networks stated:

“Its your worst nightmare!”

What does it cost to disregard the threats?

There are three major areas that need to be explored to determine the cost to the organization when the remote fails: service interruption, cost of equipment and time.

 

Calculating the hurt.

Calculating the hurt – the service interruption costs requires examining how many people depends upon the connectivity; what is the cost to the organization for their time per hour including salaries, benefits and taxes and what factor is used for re-cooping the lost productivity/time. Once that is done determine the value of that connectivity to the organization: is it a trading floor, a manufacturing unit, is it the back office, what needs to be establish is the contribution that area makes to the revenue stream of the total organization.

Another consider is the tech’s time. If the tech service is outsourced the cost will be readily available from the contractual agreement or when the bill is served.

In all the years that I have been involved in IT infrastructure I never came upon an organization that had a dedicated employee that’s only responsibility was to wait for a disaster to happen and a network to fail.

The network and facility personal always have a stream of projects to address and when the network goes down it is a disruption to these tasks. Of course they drop everything to address the problem; that is in their job description but they don’t set a side a particular day to address the problem – because they have no idea when it’s going to happen.

 

What is lost.

To create an estimate of the cost of the equipment; there are many factors to consider.

The type of event that brings the network down weighs heavily into the calculation. Damage done by bad or poor power might be solved by migrating to a more substantial UPS – upgrading from an interactive unit to a double conversion, and replacing the damage switch or server. Equipment harmed or destroyed by a disgruntle employee may create a situation where a good portion of the equipment is trashed and it has to be replaced. If a fire takes the room: all the equipment including the infrastructure – racks, cable raceways, cables, power distribution units and connections, lighting and recharging the sprinkler system etc., basically resurrecting a new installation.

Obviously the cost of the new equipment is a factor; what also has to be taken into consideration is the value of the equipment that has been destroyed or taken. Most company’s depreciates there computer assets. The standard number of years is 3 for depreciating the hardware, so if the equipment was purchased a year before the disaster event than the equipment is worth 2/3 of its purchase price.

How long will it hurt. :  Time is the multiple of the cost equation.

 It’s Monday morning and a remote network hub that is located in a small room on a leased floor that services 30 sales and marketing professionals, a 4 person management team and 6 supports personal, all using Salesforce.com – a cloud application, fails.

The cause for the outage would seem to be heat. The room doesn’t have its own air conditioning system and when the door to the wire closet was open the rush of air that escaped felt like an arid breeze. To say it was hot is an understatement.

What made this Monday special was that the previous week the building changed management and they reduced the cooling in the building over the weekend – it’s a standard procedure designed to save the landlord money. They did send a notice, informing of the change, to their tenants, but unfortunately the management team didn’t realize the effect that it would have on the systems.

The systems are down all personnel are now sitting looking blankly into their screens – all work stops.

One of the managers grabs her cell phone and calls the company’s IT help desk – that happens to be located on the other side of the city. She ventures into the room and responds to the inquisition of the tech: is the power on? Are the lights flashing on the equipment? Did you try to reboot the switch? – On and on the questions come. It determined that a tech needs to be dispatched to address the problem.

When the tech arrives he quickly diagnosis the problem; orders a new switch – because the one that was purchased a year early is now fried and informs the management team that they will be down for the rest of day and hopefully he’ll have it back up and running by morning. He was leaving to retrieve the new switch – he knows he has a very long day a head of him and the network he was installing is going to have to wait.

The sales team and management still could perform some task via their own communication device: cell phones, tablet etc. The productivity easily dropped to a low of 10% of what was expected.

What did this scenario cost the organization:

If we take an average pay of all 40 employee as $ 50,000.00 annually and we add 40% for taxes and benefits the average yearly cost to the company is $ 70,000,00 per employee.

Divide that by 252 working days a year, the daily cost per employee is $277.78 or $34.72 per hour. The systems will be down a full day so multiple the $277.78 by 40 employees and it equals $ 11,111.20

This sales unit produces $ 10,000,000.00 a year in revenue for the company. Its daily average is $ 39,682.54. Management has determined that near 75% of the orders missed that day will come in the following days so the revenue lost is estimated to be $ 10,000.00.

The average network technician salary is $42,000.00 annually – with taxes and benefits its $ 58,800.00 or 233.33.00 per day. His job description does include taking care of these problems but it’s never planned and it cost the company an additional day on the install of the new network he was installing.

The switch was purchase for $ 4,500.00 and was only a year old which put its value at $ 2,970.00. The price of a new one is still $ 4,500.00.

What did this event cost the organization: $ 11,344.53 in employee costs, $ 10,000.00 in lost sales and $ 7,470.00 in equipment costs. The total lost is a minimum of $ 28,814.53

Depending on the situation, the revenue value and the type of threat it’s easy to imagine that a failed connectivity to the organization will cost between $ 10, 000.00 to over $100,000.00 per incident.

Calculating downtime and equipment cost

Calculating the hurt:

  • Employees costs per hour
  • Tech service costs per hour
  • Revenue contribution lost  to the organization

Calculating the time:

  • Employees downtime by percentage
  • Additional employees time to become current
  • Tech service time

Calculating equipment costs:

  • Replacement cost
  • Remaining value on damaged equipment

Portable Cloud Chambers by Atlantic Web Fitters

 

 

Cost Justification


“Plan for the worst and hope for the best.”

There are five major reasons why connectivity will fail: excessive heat, poor/bad power, water, fire/smoke, and vandalism/theft

Over heated servers, humidity raised to the point where droplet fall off the equipment like raindrops, the network disappears due to theft or is damaged beyond repair by a disgruntle employee, smoke, dust, dirt and/or grit, fire creates a twisted tangled sculpture that once was the network – these are the threats. What is at stake is the interrupted service to the operation, replacement of the equipment and the cost of rebuilding the network at that location.

If some disastrous or diabolic event happens what’s would this mean? As one esteem colleague who had spent over thirty years overseeing worldwide networks stated:

“Its your worst nightmare!”

What does it cost to disregard the threats?

There are three major areas that need to be explored to determine the cost to the organization when the remote fails: service interruption, cost of equipment and time.

 

Calculating the hurt.

Calculating the hurt – the service interruption costs requires examining how many people depends upon the connectivity; what is the cost to the organization for their time per hour including salaries, benefits and taxes and what factor is used for re-cooping the lost productivity/time. Once that is done determine the value of that connectivity to the organization: is it a trading floor, a manufacturing unit, is it the back office, what needs to be establish is the contribution that area makes to the revenue stream of the total organization.

Another consider is the tech’s time. If the tech service is outsourced the cost will be readily available from the contractual agreement or when the bill is served.

In all the years that I have been involved in IT infrastructure I never came upon an organization that had a dedicated employee that’s only responsibility was to wait for a disaster to happen and a network to fail.

The network and facility personal always have a stream of projects to address and when the network goes down it is a disruption to these tasks. Of course they drop everything to address the problem; that is in their job description but they don’t set a side a particular day to address the problem – because they have no idea when it’s going to happen.

 

What is lost.

To create an estimate of the cost of the equipment; there are many factors to consider.

The type of event that brings the network down weighs heavily into the calculation. Damage done by bad or poor power might be solved by migrating to a more substantial UPS – upgrading from an interactive unit to a double conversion, and replacing the damage switch or server. Equipment harmed or destroyed by a disgruntle employee may create a situation where a good portion of the equipment is trashed and it has to be replaced. If a fire takes the room: all the equipment including the infrastructure – racks, cable raceways, cables, power distribution units and connections, lighting and recharging the sprinkler system etc., basically resurrecting a new installation.

Obviously the cost of the new equipment is a factor; what also has to be taken into consideration is the value of the equipment that has been destroyed or taken. Most company’s depreciates there computer assets. The standard number of years is 3 for depreciating the hardware, so if the equipment was purchased a year before the disaster event than the equipment is worth 2/3 of its purchase price.

How long will it hurt. :  Time is the multiple of the cost equation.

 It’s Monday morning and a remote network hub that is located in a small room on a leased floor that services 30 sales and marketing professionals, a 4 person management team and 6 supports personal, all using Salesforce.com – a cloud application, fails.

The cause for the outage would seem to be heat. The room doesn’t have its own air conditioning system and when the door to the wire closet was open the rush of air that escaped felt like an arid breeze. To say it was hot is an understatement.

What made this Monday special was that the previous week the building changed management and they reduced the cooling in the building over the weekend – it’s a standard procedure designed to save the landlord money. They did send a notice, informing of the change, to their tenants, but unfortunately the management team didn’t realize the effect that it would have on the systems.

The systems are down all personnel are now sitting looking blankly into their screens – all work stops.

One of the managers grabs her cell phone and calls the company’s IT help desk – that happens to be located on the other side of the city. She ventures into the room and responds to the inquisition of the tech: is the power on? Are the lights flashing on the equipment? Did you try to reboot the switch? – On and on the questions come. It determined that a tech needs to be dispatched to address the problem.

When the tech arrives he quickly diagnosis the problem; orders a new switch – because the one that was purchased a year early is now fried and informs the management team that they will be down for the rest of day and hopefully he’ll have it back up and running by morning. He was leaving to retrieve the new switch – he knows he has a very long day a head of him and the network he was installing is going to have to wait.

The sales team and management still could perform some task via their own communication device: cell phones, tablet etc. The productivity easily dropped to a low of 10% of what was expected.

What did this scenario cost the organization:

If we take an average pay of all 40 employee as $ 50,000.00 annually and we add 40% for taxes and benefits the average yearly cost to the company is $ 70,000,00 per employee.

Divide that by 252 working days a year, the daily cost per employee is $277.78 or $34.72 per hour. The systems will be down a full day so multiple the $277.78 by 40 employees and it equals $ 11,111.20

This sales unit produces $ 10,000,000.00 a year in revenue for the company. Its daily average is $ 39,682.54. Management has determined that near 75% of the orders missed that day will come in the following days so the revenue lost is estimated to be $ 10,000.00.

The average network technician salary is $42,000.00 annually – with taxes and benefits its $ 58,800.00 or 233.33.00 per day. His job description does include taking care of these problems but it’s never planned and it cost the company an additional day on the install of the new network he was installing.

The switch was purchase for $ 4,500.00 and was only a year old which put its value at $ 2,970.00. The price of a new one is still $ 4,500.00.

What did this event cost the organization: $ 11,344.53 in employee costs, $ 10,000.00 in lost sales and $ 7,470.00 in equipment costs. The total lost is a minimum of $ 28,814.53

Depending on the situation, the revenue value and the type of threat it’s easy to imagine that a failed connectivity to the organization will cost between $ 10, 000.00 to over $100,000.00 per incident.

Calculating downtime and equipment cost

Calculating the hurt:

  • Employees costs per hour
  • Tech service costs per hour
  • Revenue contribution lost  to the organization

Calculating the time:

  • Employees downtime by percentage
  • Additional employees time to become current
  • Tech service time

Calculating equipment costs:

  • Replacement cost
  • Remaining value on damaged equipment

Portable Cloud Chambers by Atlantic Web Fitters

 

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