The effect of lost data on business operations
Companies recognize that data loss represents a business risk. Even if a monetary value is not assigned to the data, the negative effects on operations can be significant. In many cases, corporate operations can be so adversely affected that companies feel the need to mention the risk in regulatory filings and shareholder reports.
Three types of damage may occur because of data loss. First, data may be unrecoverable. In this case, important business records may be lost forever or available only in hard-copy form. Any business process that is dependent on that data will now be considerably hindered. This is the worst form of damage that can occur.
Next, data may be recoverable but may require considerable time to restore. This scenario—the most likely—assumes that data is backed up in some other place, separate from the primary source. This is a better situation than irrecoverable loss, but the data will be unavailable while recovery operations take place. In some cases, not all the data may be recovered. This is a common problem with data restored from nightly backups. Any data created during the day when the primary data was lost is not on the backup tapes and is lost forever.
Finally, while data is unavailable, either permanently or temporarily, applications not directly related to lost data may fail. This is especially true of relational databases that reference other databases. Loss of a central database of customer information, for example, may cause problems with the sales system because it references customer information. A loss of this type can result in cascade failures, in which several applications fail because of their dependence on another application's data.
RISK TO SALES
A company may suffer measurable harm when data loss makes it impossible for it to interact with customers. The result is that the companywill n ot realize sales and revenue.
E-mail has become a primary form of corporate communication. Losing an important e-mail or attachment may mean that a customer may not be serviced correctly; thus, sales are lost. This is especially true of companies that sell capital equipment to other companies. A hard drive crash on the e-mail server may cause an important bid to go undelivered. The salesperson may not even know that the bid was not received by the customers (because it is sitting in the Sent folder stored on a local hard drive) until the sale is lost.
As large companies have become more dependent on call centers, they have become equally dependent on the customer relationship management (CRM) systems that help them track customer issues and orders. This represents a risk to sales, revenue, and profitability. If this risk is realized—if the worst-case scenario comes true—the harm done to the business may be severe enough to propel it into bankruptcy.
INABILITY TO OPERATE
Extreme1data loss such as loss of an entire database, even temporarily, has been known to cause organizations to fail. A company may not be able to fulfill orders, update employee records, produce financial reports, manufacture goods, or provide services. It may not even have an operating phone system. Computer technology and the data associated with it are integrated into all aspects of an organization's operations. Because of this dependence on information technology, there is a clear risk that data loss can make it impossible for an organization to perform properly.
Even partial data loss can disrupt business operations and produce negative effects. Employees may be idled for long periods of time while data is re-created or recovered, reducing productivity. Applications may fail unexpectedly when referencing data that is no longer available. Essential reporting may be incomplete because component data is not available.
Loss of data also makes it difficult for managers to measure company operations. Most modern businesses rely on financial, market, and manufacturing metrics. Without the ability to gather and report on key business indicators, managers are running blind as to the health of the business. Destroyed, damaged, or altered data skews metrics and disrupts decision-making. The overall effect of this type of disruption is reduced revenue and higher expenses, leading to loss of profitability.
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This was first published in November 2005