Most businesses I visit have never calculated their actual cost of IT downtime. They have a general sense it's disruptive, but when I ask for a number, I get a shrug. That gap between "it's a problem" and knowing what a problem actually costs is why most IT investment decisions get made badly.
The staff hour calculation misses most of the cost
The standard calculation goes: 15 people can't work for two hours, that's 30 staff-hours, at an average of £28 per hour fully loaded, that's £840. Inconvenient but manageable.
The problem is that direct staff time is rarely the largest cost of an outage.
Management attention during an incident is significant and almost always underestimated. A two-hour technical outage typically generates four to six hours of senior management time: diagnosing, communicating with staff, escalating to IT support, handling client impacts. That time has a high per-hour cost and comes out of other priorities.
Revenue impact for most service businesses is the bigger number. Missed sales calls, delayed proposals, SLA breaches, orders not processed: for a business with £1.8m turnover where 85% of activity depends on working IT, you're looking at roughly £765 per hour in stopped revenue before you count staff costs or recovery work.
Recovery costs add to that: IT support time, potential data recovery work, hardware replacement if the cause was equipment failure.
Reputational cost is the one nobody puts on a spreadsheet but often lasts longest. The client who couldn't reach you, got a wrong order, or received a delayed response may not complain. They may simply not call again.
Do this calculation for your own business
Take your annual revenue. Divide by 2,000 (approximate working hours in a year). Multiply by the percentage of activity that depends on IT. For most professional services firms, that's 80-100%. The result is your revenue cost per hour of downtime, before anything else.
A £2m turnover business at 90% IT dependency loses roughly £900 per hour in stopped revenue. A four-hour outage (not unusual when the cause needs diagnosis and a part needs ordering) is £3,600, before staff time, IT costs, or clients who quietly went elsewhere.
How this should change your IT decisions
A backup internet connection costs £45-80 per month. If your business loses £600 per hour when connectivity fails, one three-hour outage you could have avoided pays for years of failover costs. That's not a close calculation.
The premium for same-day hardware replacement on a server is around £200-400 per year in most managed contracts. Against a realistic downtime figure, that's a straightforward decision. So is a UPS on your network equipment (around £100-200) that keeps you connected through short power interruptions.
The businesses I see making sensible IT investment decisions are the ones that have done this arithmetic. The ones running on ageing hardware with no redundancy are the ones treating IT purely as a cost line, until an outage makes the actual maths visible.