Abstract

Hard drive failure is an inescapable reality in the modern business world. Whether due to human error, software corruption or other causes most firms will face incidents of lost data through hard drive failure. In this paper we analyze the various causes of hard drive failure and estimate the costs of each incident. Our calculations indicate that on average a single data loss incident will cost an organization $2,900, the majority of which is measured as lost productivity. Finally, we offer seven suggestions for responding to hard drive failures.

Results of Data Loss

Data loss and computer downtime have serious implications for business. Lost data can lead to costly downtime for sales and marketing and reduced customer service while customer databases are restored or rebuilt. Lost financial data can lead to lost contracts and stock value, or worse. A recent study by Datamonitor found that as many as one-third of IT decision-makers believes that a major data loss incident at their firm could lead to bankruptcy (Datamonitor, 2007). Small businesses may be more vulnerable, according to a recent survey by Verio. Seventy-percent of small businesses reported that a single incident of data loss would be considered significant and costly. These concerns are well grounded as over one-half of the respondents have already experienced some data loss (Verio 2007). Although hard drive manufacturers claim less than a 1% failure rate, recent research by computer scientists at Carnegie Mellon University found that a 2%-4% failure rate is more common and under some conditions the failure rate may reach as high as 13% (Schroeder & Gibson, 2007).

The cost of lost data varies depending upon its application, as well as the potential value that can be captured from use of the data. In addition, there is a cost associated with recovering the data, as well as lost productivity due to computer downtime. Using available data and existing research, this paper attempts to quantify the costs associated with episodes of data loss, considering the costs of recovery, as well as lost sales and reduced productivity.

The Cost of a Data Loss Incident

An episode of data loss will result in two outcomes: either the data is recoverable or is permanently lost. In today’s environment, with numerous backup and recovery solutions, businesses need not suffer episodes of irretrievable data, except in case of careless planning or major disaster. We will assume for the purposes of this paper that all data may be retrieved. However, as demonstrated in prior work (Smith, 2003) the inherent value of data can be significant, and as noted earlier, if data is permanently lost it could bankrupt many organizations. Setting this possibility aside, this study will instead focus on the costs of retrieving data, as well as lost productivity and sales during an episode of computer downtime.

In approximately 40% of cases--when there has been no physical damage to the hard drive--data may be retrieved by an in-house technical support person. These cases are often caused by human error, software corruption, or computer viruses. We offer advice for restoring data in these cases below.

In the case of hard drive failures and instability episodes, which make up approximately 70% of severe data loss incidents, internal recovery efforts are not advised, and outside expertise should be sought. The cost of data recovery can vary widely, depending on numerous factors, including the size and type of storage media, severity of damage, parts required, and urgency. The authors conducted an independent survey, by polling eight separate data recovery companies on the estimated cost of recovering a 160GB desktop hard drive. Price estimates varied from $300 to $3,900 depending on the vendor along with the factors noted above. The highest prices were reserved for highly time sensitive (1-2 days) data recoveries. For standard recoveries, the majority of estimates fell between the range of $500 - $2,500. By taking the midpoint of this range as a reasonable approximation, the average cost of recovering data on a 160GB hard drive would cost $1,500.

In cases where the data may be retrieved with in-house expertise, we must consider the internal resources that are encumbered. 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 Bureau of Labor Statistics reports that the average computer support specialist currently earns $44.60 an hour, including salary and benefits. Assuming that the average time needed to recover lost data is approximately 8 hours, the cost of using an in house employee to recover lost data is approximately $350.

Taking into account the expected probability of whether the data can be retrieved in-house or would need to be sent to data recovery specialists, the expected average cost to retrieve data is calculated as $1,150. Figure 5 summarizes the cost incurred in order to recover the lost data.

In addition to the cost of outsourcing the recovering data, users and companies are subjected to lost productivity. Every computer user has experienced a time of frustration—and corresponding lost productivity--when their computer is unavailable for use. When data loss occurs, these episodes can sometimes become protracted, and can become quite costly. In order to estimate the costs, the following factors must be considered: the individual user’s productivity, the length of the downtime, and the extent to which an individual’s data loss episode affects others in the organization.

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 other more common and explicit costs. By what mechanism does this impact the bottom line? Some employees are directly involved in sales and revenue production; others are involved in more supportive or indirect roles. Economic theory says that each employee’s productivity, or contribution to firm revenue, can be approximated using the individual’s compensation. Available data sources suggest that individuals who use computers at work earn an average of $46.48 an hour in wages and benefits. The time needed to recover data may vary greatly from one hour to several days. In addition, most workers won’t have their productivity reduced to zero, as they could perform other tasks that do not require their computer. We will assume a productivity slowdown of 50 percent.

Costs begin to mount when considering the “contamination effect”: when one individual’s computer downtime affects others within an organization. The IT Department may have to be involved, and in work environments that are collaborative, productivity slowdowns may impact many others within the organization. The slowdowns will depend on the level and nature of collaboration. In a related scenario, when a computer network is down, others have estimated that costs may run into millions of dollars for each hour of downtime (Patterson, 2002).

Precision in estimating the contamination effect will depend on the factors noted above, but a conservative estimate for a typical data loss episode might suggest that an individual’s inability to access key data would impact 3 other co-workers’ productivity, and reduce their productivity by 25 percent each.

The total loss due to productivity slowdown depends critically on the length of downtime, which will be determined to a significant manner on whether the computer needs to be sent to an outside firm, or whether the data can be retrieved in-house. For outside recoveries, the authors’ survey of data recovery firms suggests a 5-day turnaround would likely serve as the minimum amount of time needed for a standard hard drive recovery, including time needed for transport. For in-house recoveries, 8 hours would appear a reasonable estimate of time needed for recovery.

Taking into account these various factors—whether the data is recovered onsite or not, the length of the recovery period, and the expected “contamination effect,” the average estimated productivity loss due to an episode of data loss is $1,750. Figure 6 summarizes this expected productivity loss.

Adding together the expected cost of data recovery ($1,150) to the expected loss of productivity ($1,750), we calculate an average cost of a data loss episode as $2,900. Once again, this assumes that the data is retrievable. If data is lost on a permanent basis, this estimate would grow significantly, as shown in Smith (2003). Note that productivity losses dominate the costs of an episode of lost data.

Understanding Hard Drive Failure

Understanding hard drive failure is important because it is the largest single explanation for data loss. Hard drive failure may be related to mechanical, electronic, or firmware failures. Mechanical failures occur when physical components of the device itself begin to wear or malfunction. Electronic failures occur when the printed circuit board (PCB) begins to produce errors. Finally, many hard drive failures are related to out-of-date, corrupt or buggy firmware. Firmware is the controlling software that is built into the hardware device itself stored on disk platters of the drive. Like most software in use today, firmware may become damaged or corrupt over time. This is a very common failure for modern drives because of the complexity of firmware design.

5. Conclusion

In this paper we have analyzed the most common causes of data loss, estimated the average cost per incident, and suggested several strategies for responding to a hard drive failure. In summary, every firm will face the problem of hard drive failure. We argue that as data storage costs decrease and the role of information technology in modern firms increase these problems will become more prevalent. Using the strategies described above, however, a firm should be able to recover data from most hard drive failures through either internal support services or external data restoration services.