Calculating Uptime Improvement ROI

Example Profit and Uptime Curve

Example Profit & Uptime Curve from the Uptime ROI Calculation Tool

Paying for any type of expensive prevention – whether it’s insurance or backup software – can sometimes feel hard to justify because you have to think about the odds that something will happen to you and what it will cost.  The same is true with preventing software disasters and investing in improving your system to increase uptime.

To help you figure out the expected ROI of improving your uptime, I’ve built the Uptime ROI Calculation Tool V1*.  This simple model is based on a sales portal, but could be easily changed for an online service (just add Churn % and voila!  Maybe I’ll add it in V2.)

How it works

You can plug in your numbers to figure out how much you can grow your profits through investment in uptime improvements.  Just change out any cells you see in pink  and the numbers should update for you.     The tool is seeded with some example numbers as placeholders so you can easily see how it works.

Online Sales Assumptions

Peak Customers / Day – put in the average number of customers that visit your site on your best days.

Peak Days / Month – how many days per month do you have the peak number of customers?

Avg Customers / Day – for your non peak days, how many customers do you have on average?

Sales Conversion % – What percentage of customers purchase something when they visit?

Avg Purchase / Customer – How much do people spend on average when they buy?

Avg Fulfillment Margin – What is your average profit margin on each sale?

Uptime Goals / Improvement Costs

Current Uptime – What is your current uptime percentage for your site?  This will show the current revenue and profit loss based on the sales assumptions.

Goal Uptime – What uptime do you expect to achieve if your improvement project is successful?   You can now see what profits you’re missing from not being at this level of uptime.

Cost to achieve uptime goal – How much will it cost in order to see the expected improvement?  This should include labor costs, capital costs, hardware, software, testing and anything else required to make the new uptime percentage a reality.

Estimated Return On Investment (ROI)

After you’ve plugged in all your numbers, you will be able to see if this project is a good idea financially, and how it play out over 1 month, 1 year, and 3 years.  Now you can make a more educated decision.

Also, you can see the Uptime/Profit curve for your current sales assumptions so you can visualize the effects of downtime on your profits.

Conclusion

Achieving higher uptime means better service for your customers and better profits for your company.  However, raising the bar on uptime comes at a cost and it’s important to evaluate the investment up front.

I hope you found this tool informative and useful, and I’d appreciate any feedback!  Do you have ideas for how to improve it?  What other factors are important in making an IT investment to improve reliability?

* Disclaimer on the Uptime ROI Calculation Tool – This is provided as is with no warranty expressed or implied.  Use at your own risk, I assume no responsiblity for its use.  It is intended for demonstrative purposes only.  Take that lawyers.

Advertisements

About Kit Merker

Product Manager @ Google - working on Kubernetes / Google Container Engine.
This entry was posted in Business Continuity, Cloud, Disaster Recovery, Downtime, Technology, Uptime and tagged , , , , , , , . Bookmark the permalink.

6 Responses to Calculating Uptime Improvement ROI

  1. Pingback: Software Shouldn’t Cry Wolf |

  2. Pingback: My site is just taking a break, I can still hit 99.9999% |

  3. Pingback: Little Disasters Worse Than Big Disasters? |

  4. Pingback: 5 Stages of Grief |

  5. Pingback: Thoughts on Windows Azure Leap Day Downtime |

  6. Pingback: Proactive Server Monitoring Pitfalls |

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s