Estimating the Cost of Incidents

I'm asked by a customer through our support service here at Serio:

How do you estimate how much all of our Incidents cost the business? Any pointers you can give? I've been asked this by our IT Director.

I'll start by saying this is almost impossible to do retrospectively, and I'll go on to explain why shortly.

It's worth noting there will be two cost streams in any such calculation: the cost to the business of the Incident itself, and the cost of providing the service to resolve the Incident. Both of these might be very tricky to pin down, particularly the first one - which is the subject of this post.

I'd also counsel against providing 'junk' statistics just because someone asked for them.

Cost to the Business of the Incidents we Log

Let's start with Major Incidents. Because Major Incidents usually

  • happen infrequently
  • have significant business impact
  • and affect groups of users we can more easily identify

it is usually much easier to assess their business cost by assessing lost production hours, loss of profitability, damage to reputation and so on. For a full discussion about this, including formulae you can use, see our Availability White Paper.

Whilst the above can take care of a small handful of Major Incidents, what about the rest of your Incident workpool (which I'll call Routine Incidents). Routine Incidents in my definition range from tickets affecting a desktop computer to a stuck mouse. How do you assess the financial cost of these to the business?

Retrospectively, I don't think you can do that easily, if at all. The fact is that some Incidents will have no cost (someone wishing to upgrade to Firefox 3 or get their screen cleaned), some will have a cost, but a cost quite difficult to calculate because it is connected with intangibles such as lost business opportunity. Aside from going through each Incident individually, it's hard for me to see any system that would deliver meaningful (as opposed to made-up-on-the-spot) statistics.

Going forward, there is something you might be able to do. In the same way that Cause Categories are applied to Incidents when they are closed, you might also apply a cost code which would be a way of approximating the actual cost of the ticket. The person responsible for setting the ticket as resolved could set this value, or it could be an off-line job for the Helpdesk/Service Desk. In either case it's going to be a value judgement. I can think of about 3 ways of creating and using such a code in Serio.

For example, you might decide upon 5 cost codes

0 - No cost, zero

1 - £0-£5

2 - £5-£20

3 - £20-£50

4 - £50-£100

5 - £100-£200

...and then all you need to do is run a report aggregating these, choosing either the low or upper value from each cost code to come to an actual cost.

I'll post about calculating the cost of the Incident Resolution process later in the week.