How to Calculate Disaster Recovery Cost

Disaster recovery should be an essential part of any good IT strategy, but all too often businesses overlook this important issue. While it’s easy to see why some companies are reluctant to invest in disaster recovery, the truth is that a great recovery plan could mean the difference between a minor IT hiccup and a complete system outage that takes weeks to recover from. 

If you’re considering whether or not your business needs a disaster recovery plan, the chances are it does. Read on to learn more about how to calculate disaster recovery pricing and who needs it.  


Who needs a disaster recovery plan? 

Disaster recovery was once only considered by large-scale businesses handling huge amounts of customer data. But in today’s interconnected, digital world, almost all businesses rely heavily on digital systems for everything from interacting with customers to processing orders and managing logistics. 

When every aspect of a company’s IT system is running smoothly, this digitalization offers great advantages. But it also means that sometimes all it takes is a problem in one part of the system to bring the whole team to a standstill. 

If your business relies on its IT systems for almost anything, you’ll need a robust disaster recovery plan. No matter how large or small your company is, a real disaster could result in huge costs for your business, and it could have a damaging effect on your reputation too. 


How much do disaster recovery plans cost?

The cost of a disaster recovery plan is a key reason why so many businesses overlook the issue completely. Yet disaster recovery doesn’t have to be costly. Usually, it’s just a case of understanding what your company might need and how you would achieve these goals. 

When considering the expense of a disaster recovery plan, you’ll need to think about several different factors. Firstly, concentrate on your data. You’ll need to know how much data you already have backed up, how often these backups are created, and how quickly your service provider would be able to get you back online should you face a system outage. 

Talk to your current provider about what they can offer, and make sure this would be adequate in a time-critical situation. Do your research and ensure that you know exactly what your company would need, taking into consideration both expert advice and different price points for a range of services. 

Think of your disaster recovery plan as an investment. Because this is one investment that may be worth its weight in gold one day! Too many companies are complacent when it comes to planning disaster recovery, and the result of this complacency is ultimately a far higher cost for recovery should the worst happen. Disaster recovery is a form of insurance, and it’s one that all businesses should be prioritizing. 


Disaster recovery pricing: What’s involved? 

Once you start weighing up the potential costs of a disaster recovery plan, you’ll soon find a huge range of options available. So, how do you budget for disaster recovery, and what’s really involved in disaster recovery pricing? 

The disaster recovery costs consist of indirect and direct costs. Let’s take a look at each category in detail.


Direct Costs

Direct costs in disaster recovery encompass the tangible and quantifiable expenses directly associated with restoring operations after a disruptive event. These include: 

  • Equipment replacement
  • Repair and restoration of infrastructure
  • Data recovery
  • Temporary facilities setup
  • Inventory replenishment
  • Transportation logistics
  • Professional services
  • Insurance deductibles
  • Utility restoration
  • Business interruption losses

Accurately assessing and budgeting these costs is crucial for effective disaster recovery planning.


Indirect Costs

Indirect costs in disaster recovery refer to the less tangible and harder-to-quantify expenses that arise as a result of a disruptive event. These include: 

  • Lost productivity and efficiency
  • Damage to reputation and customer relationships
  • Regulatory fines and penalties
  • Employee morale decline
  • Supply chain disruptions
  • Long-term revenue loss

While these costs are challenging to measure upfront, they can significantly affect the overall financial and operational health of an organization in the aftermath of a disaster. 


Disaster Recovery Pricing Parameters

Calculating how much to budget for disaster recovery is actually simpler than it sounds. It’s just a case of understanding what your digital assets are worth, and what the cost implication would be if you were to lose them.

Remember, these costs will primarily center around financial calculations, but reputational damage should also be considered, along with a potential loss of earnings in the future while you take steps to repair the harm that’s been caused to your brand. 

The following disaster recovery parameters will help you decide what you should budget for in your plan: 

Recovery Time Objective (RTO): This is the period of time you’ll have from the start of a disaster to the disaster causing an interruption in what your business can offer its customers. It will show you exactly how long you’ll have to recover from a disaster before it starts to impact sales and customer service. Once you know this, you’ll have a better understanding of how much budget should be set aside for the plan. 

Recovery Point Objective (RPO): This is the amount of data that you can reasonably afford to lose in the event of an emergency. You’ll need to know this because there comes a point in any disaster recovery plan when too much data has been lost, and recovery is no longer possible. 

Calculate the point at which this would occur to make sure you understand your RPO fully.


What to do with your data?

This is one of the biggest considerations for disaster recovery and can have a significant impact on business continuity in the event of an outage. Most organizations have two main options here:

  • Data backups – These are historical versions of information that have been taken at specific, predetermined, points in time. These should also be commonplace within any enterprise that is handling data. 
  • Replicated data – This involves making exact copies of data and ensures any information lost in the event of a disaster can be accessed again almost instantly. 

Choosing one or both of these options comes with a different price tag depending on the volume of data being handled and the storage required. However, they are an essential part of any disaster recovery plan.


Prioritize disaster recovery pricing to avoid problems later

A great disaster recovery plan can come at a considerable cost, and of course, a well-thought-out plan takes time to create, manage, and test. But usually, the costs of a plan pale into insignificance when you consider what a real disaster could do to your business. 

It’s no secret that revenue losses can occur on the back of downtime, and that’s not to mention the indirect costs caused by reputational harm and loss of business. 

Disaster recovery is an investment, but it is one that today’s data-driven organizations can not afford to ignore. If you’d like any more information on disaster recovery, get in touch with our team. 

We offer four interconnected data centers that can be used for data replication as well as data backup software to prevent such costly losses.