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The Cost of Lost Data
The cost of lost data from computers is substantial. Businesses must be proactive in protecting this important resource.
All computer users are familiar with the problem of lost data. Fortunately, most such incidents are relatively inconsequential, representing only a few minutes of lost work or the deletion of unnecessary files. However, sometimes the nature of the lost data is critical, and the cost of lost data is substantial. As reliance on information and data as economic drivers for businesses continues to increase, owners and managers are subject to new risks. One study reports that a company that experiences a computer outage lasting for more than 10 days will never fully recover financially and that 50 percent of companies suffering such a predicament will be out of business within 5 years.
Data loss incidents can be hardware or software related. Consequently, a consideration of both is necessary to estimate the magnitude of data loss. Estimates suggest that the most common cause of data loss is hardware failure, accounting for 40 percent of data loss incidents. These include losses due to hard drive failure and power surges. Human error accounts for 30 percent of data loss episodes, which include the accidental deletion of data as well as accidental damage done to the hardware, such as damage caused by dropping a laptop. Software corruption, which might include damage caused by a software diagnostic program, accounts for 13 percent of data loss incidents. Computer viruses, including boot sector and file infecting viruses, account for 6 percent of data loss episodes. Theft of hardware, especially prevalent with laptops, accounts for 9 percent of data loss incidents. Finally, hardware destruction, which includes damage caused by floods, lightning and fire, accounts for 3 percent of all data loss episodes.
An episode of severe data loss will result in one of two outcomes: either the data are recoverable with the assistance of a technical support person, or the data are permanently lost and must be recreated. A calculation of the average cost of each data loss incident must take into account both possibilities. The ability to recover data depends on the cause of the data loss episode. The permanent loss or theft of a laptop whose data have no tape backup will result in permanently lost data. In addition, fire or flood damage can also make the possibility of data recovery very remote.
The first cost of data recovery to be considered is that associated with hiring a computer support specialist in the recovery effort. If there is a computer support specialist employed within the company, both the number of hours needed to recover the data and the cost of employing this individual must be taken into account. The time needed to recover data may vary greatly. If a data backup exists and is readily accessible, the time needed to recover data may be very short. At the other end of the spectrum, if the data are corrupted on the hard drive, several days may be required to retrieve the data.
During the time in which the attempt to recover data is underway, an individual is unable to access his or her PC, thereby reducing productivity, which in turn impacts company sales and profitability. This opportunity cost, lost productivity due to computer downtime, impacts a company's income statement just as do other more common and explicit costs. Lost productivity represents missed opportunities for income generation.
The final cost to be accounted for in a data loss episode is the value of the lost data if the data cannot be retrieved. As noted earlier, this outcome occurs in approximately 17 percent of data loss incidents. The value of the lost data varies widely depending on the incident and, most critically, on the amount of data lost. In some cases the data may be recreated in a short period of time, a result that would translate to a relatively low cost of the lost data. In other cases, the value of the lost data may take hundreds of man-hours over several weeks to recover or reconstruct. Such prolonged effort could cost a company thousands, even potentially millions, of dollars. Although it is difficult to precisely measure the intrinsic value of data, and the value of different types of data varies, several sources in the computer literature suggest that the value of 100 megabytes of data is valued at approximately $1 million, translating to $10,000 for each MB of lost data.
Conservative estimates place the rate of data growth at 80 percent per year. Not only is the amount of data increasing, but business reliance on data is also rising.
Implications from this research are clear. Business managers should invest in technologies that can reduce the possibility of data loss. A saying that precedes the advent of the computer is appropriate here: an ounce of prevention is worth a pound of cure.
source: Journal of Contemporary Business Practice
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