Hidden Cost of Data Loss

Its repercussions are reverberating throughout individual homes and across businesses and governments. The loss of a memorable and unique digital photograph of a loved one, the loss of your digital phone book, losing the accounting data of your Company and losing vital defence research data etc., are very great losses that cannot be compensated for easily. Recovery from such data losses is time-consuming, energy depleting, financially depriving and mentally disturbing. The consequences could vary from loss of a touching memory, folding up of a profitable Company or, worse still, the loss of national identity or physical boundaries.

The most common and crippling consequence of data loss is felt by industry and business, globally. Loss of sales tracking data is like trying to find your customer, blindfolded. Future business opportunities end up in dead alleys. Large-sized client lists get progressively smaller due to lesser interface with customers, who you do not know anything about, thanks to the loss of your comprehensive client profile database. Customer migration to the competitors is the next logical step.

Direct loss of money, due to breaches in future payment schedules and past billing information (which were accidentally lost) also manifests itself. Debtors, creditors, receivables, payables, and financial performance are caught up in chaotic mess. Can anyone make sense out of anything?

Spending hard-earned money on retrieving lost data, further taxes the financial resources of a Company threatened with data loss.

Statistics exist to prove that businesses fold up due to data loss. In the United States alone, $12 billion is consumed annually by business losses, suffered as a consequence of data loss. Research has observed that a majority of the companies which lost their data for more than 10 days, filed for bankruptcy within a year of the data loss. Almost 50% of the companies which suffered a data loss for more than 10 days but did not have a recovery plan in place instantly became bankrupt. The cost of losing a single customer’s record increased to US$197 per record (in 2007), compared to $182 (in 2006). Alarmingly, in the event of a major data loss, the daily revenue of a Company loses ground by 25%!

The prime reason, why data loss is continuing its increasingly destructive march, is because of the fact that human intervention and human negligence are necessary occurrences. Someone has to ensure that the tape cartridge is to be fed into the tape drive and check that it is working. Technology is yet to automate this simple step.

The second most important reason for a nonchalant attitude towards data protection and data loss is because of the fact that the individual concerned responsible for data protection or facilitating the data loss just does not see the long term consequences of the negligence to the Company. The individual in the EDP section may not be able to visually see the effect of the data loss on the 25% revenue hit (in its daily revenues) absorbed by the Company, one week after a data loss.

To understand the gravity of data loss and its cost, it is only correct to quantify the monetary cost in terms of:

• Can the Company continue its existing operations without the data? (No database of sales / vendors / prospective clients means time spent in physically contacting them over phone or personally, instead of the routine automated e-mail and obtaining copies of previous transactions or future agreement details.) What about the cost to goodwill, efficiency and reliability of service in monetary terms?



• Recreating the data by entrusting the time-consuming job to the professional data recovery companies. The cost of recovering the data should include the other ancillary costs like administrative expenses (maintaining a customer call centre without having the customer’s background data!), legal expenses (customer law suits due to poor service) and the resulting damage to reputation and goodwill.

Not just on the home front, but also in respect of other sectors of society, it is good to remember that ‘Money saved or time spent on recovery from data loss, is money earned or time saved.’

About the author:
James Walsh is a freelance writer and copy editor. If you are concerned about data loss and would like more information on Data Recovery see http://www.fields-data-recovery.co.uk



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