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Business continuity: Optimum recovery time objectives

Calculating the right recovery time objective is an advanced skill that can save your customers money by minimizing business losses and maximizing service contracts. The key is knowing how to determine the cost of downtime; learn how.

In the realm of business continuity services, there's a real need for channel partners who can calculate a customer's optimum recovery time objective in the event of a system or software failure. By determining the cost of downtime for critical business processes, service providers can help customers minimize their business losses and maximize their service contracts. So what is the recovery time objective?

Simply put, the recovery time objective is the point at which the cost of the service support contract is exceeded by the cost to the business in lost revenue caused by downtime. Downtime of any technology that supports critical business functions has a serious impact on those business processes. So, if the business in question is in online sales, and the sales support system fails or slows down significantly, customers who are looking to make a purchase are going to experience poor or no service and will likely take their business elsewhere. At the very least, the revenue that online sales generate will decrease.

If those in IT operations know how many internal users use the sales support application and roughly how much revenue per seat is generated, it is easy to determine the amount of revenue that would be lost in a complete failure. That amount will be equal to the number of seats affected multiplied by the number of hours down, multiplied by the revenue per seat per hour.

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Using the same data, you can estimate a proportional amount of lost revenue for cases where an application slows down but doesn't fail.

Using recovery time objective to sell services

Many of the clients channel partners encounter will never have calculated the cost of downtime. While knowing the cost of downtime would seem to be a fundamental business metric for any company, there are few IT groups that have any experience mapping business processes to understand the impact of slow or no system performance. But they're hungry for expertise, so channel partners are in a good position to provide professional services in this area.

Once a client understands how expensive downtime is, it is possible to compute the recovery time objective and, incidentally, the maximum service contract value. The contract value can be determined by plotting the service contract price against the level of service and the business impact against service restoration times. Where the two lines cross is the level of service required to minimize the amount of downtime acceptable to a customer. Generally, for most business processes that generate revenue, an acceptable downtime should be less than two hours, but for highly leveraged business tasks, it could be measured in minutes. In such a case, services that provide standby processing or even disaster recovery resources can be attractive.

The bottom line is that an optimum recovery time objective should be proportional to the cost of an outage, and that cost should be the starting point for defining recovery objectives or service levels.

About the author: Mike Jude, a senior analyst at Nemertes Research, is an expert in business process analysis and optimization. He is also co-founder of Nova Amber, a consulting firm specializing in business process implementation and technology.

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