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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.
Statistics on data loss are sparse. Data loss incidents can be hardware- or software-related.
Consequently, a consideration of both is necessary to estimate the magnitude of data loss. Thus,
this study combines two data sources to estimate the magnitude of data loss in the US: (1) claims
data from an insurance company that insures computer hardware; (2) survey data from a company that
specializes in data recovery. Estimates from this combination 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. The relative magnitudes of the
different types of data loss are illustrated in the chart above.
Total Annual US Data Loss Costs
When information on data loss episodes is mapped along with the cost data, an estimate of aggregate
data loss may be obtained. This calculation estimates that annual data losses to PCs cost US
businesses $18.2 billion. This estimate represents an increase from a 1999 study that estimated
the annual cost of lost data to be $11.8 billion. Although it is difficult to measure with
precision the cost of lost data, and the analysis is sensitive to the assumptions that underline
its calculations, there are several reasons to believe that $18.2 billion is a conservative
estimate. First, that figure does not take into account costs that are difficult to quantify,
such as lost sales and reputation damage a firm may experience during an extended period of
computer downtime. In addition, research in the field of network economics suggests that extra
costs would be incurred if a data loss incident occurs to two or more PCs on a network. Such
additional cost is due to the interdependence and reliance that each computer user experiences
when working with other computer users. As noted earlier, research on incidents of server
downtime suggests that such costs can be significant. Finally, it is important to note that
these figures do not include any collateral costs that may be incurred in some instances of data
loss, such as when damaged hardware must be replaced.
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Wikipedia: Data Loss
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