Many data processing professionals and corporate executive officers face difficult business decisions that will affect the cost of providing information processing disaster contingency plans in the future. The time has come for managers to take a proactive approach toward managing one of their company’s biggest assets — computerized corporate data. Twelve disaster contingency processing options are considered below.
When analyzing this list of options, each company must balance immediate disaster contingency expenses with the strategic planning goals of the company. Many corporate strategic plans may include such considerations as market flexibility, corporate positioning for acquisition or divestiture, real estate investment and certain tax strategies such as investment tax credit or asset depreciation or appreciation.
Due to the inherent difficulty — and in some cases, virtual impossibility—of quantifying financial exposures resulting from a data center disaster, an analysis of the following options should aim at providing a logical business solution that includes estimated costs, quantifiable benefits and addresses the strategic goals of the corporation as well.
- An agreement between the organization and a local company whereby each company agrees to share the other’s DP facility if a disaster occurs.
Strengths - Low costs: immediate availability of equipment if the other company has excess capacity; effectiveness for short-term requirements; and nearby location with minimum travel, lodging and meal expenses incurred.
Shortcomings - Partner in agreement may suffer from effects of same disaster, additional equipment and computer time required to accommodate the partner; each company’s hardware and software may not be compatible; difficult to obtain time for testing; and not a long-term solution.
ALTERNATE SITE RECONSTRUCTION
- The assumption is that a disaster has totally destroyed a facility housing a DP operation. The contingency plan calls for reconstruction of the existing facility or the construction of a new facility.
Strengths - Long-term availability; one owner.
Shortcomings - Expensive to rebuild and configure; time lost in reconstruction, equipment installation needed during reconstruction phase; difficult to test the effectiveness of this option except by simulation of a disaster.
- Also called group mutual aid, this option is an expansion of the first reciprocal agreement option. This is an agreement with several member firms that agree to share their DP resources with the member company that suffers from some sort of disaster.
Strengths - Shared costs — pool of members lessens the burden of any one firm having to supply total backup for the affected firm; can be effective for short-term outage; immediately available, depending on agreement.
Shortcomings - Partners may suffer from effects of same disaster; additional computer time must be available from member firms; maintaining hardware and software compatibility among members may be difficult; testing time and resources may be difficult to obtain; more members increase the probability of needing computer time from a member firm’s DP facility; member firms may be geographically spread out, thereby increasing transportation costs and inconvenience.
- An empty shell, also called a cold site, is a facility that contains no DP equipment. Except for environmental support such as air conditioners, water conduits, raised floors, motor generators, power outlets and a security system, the facility is just a warehouse that can be made ready for the installation of DP equipment.
Strengths - Low cost, since expenses are shared with multiple owners; immediate availability; long-term availability; nearby location; minimum travel, lodging and meal expenses incurred.
Shortcomings - Partner may suffer from effects of same disaster; once a disaster has been declared, the facility must be equipped, staffed and made operational; may require inordinate lead time to become operational; testing is extremely limited since no hardware is installed; comparatively low return on investment when not in use.
EQUIPMENT VENDOR AGREEMENT
- With this option, it may be possible to contract with a vendor to use its corporate facilities, such as a support center, to process the organization’s DP work load should a disaster occur. The optimal time to obtain such a written agreement may be during the equipment contract negotiations.
Strengths - This option may be cost-justifiable, depending on agreement; long-term availability; vendor knowledge of the organization’s needs and configuration.
Shortcomings - Difficult to obtain a satisfactory written agreement; involves transportation and installation costs; difficult to secure test time; lead time required to staff, test and become operational.
- A service bureau is a commercial facility that supplies necessary resources to process a company’s DP work load. Some service bureaus specialize in data entry preparation or time-sharing, while others can provide full DP services from input preparation to delivery of the necessary output products.
Strengths - An expense only when used; immediate availability; long-term availability.
Shortcomings - Expensive for long-term use; high usage fees; may not be available for preferred hours or days because of other customer commitments; lack of security control over bureau; may involve transportation costs; difficult to perform effective testing.
ALTERNATE SITE - EQUIPPED
- This option, also called a hot site, is basically an equipped empty shell approach. In this case, the DP facility is equipped but not staffed.
Strengths - Long-term availability; one owner; immediate availability; easily tested.
Shortcomings - More costly than other options; additional capital expenditure for unused equipment; comparatively low return on investment; some transportation costs.
THIRD-PARTY STANDBY FACILITY
- Another type of hot site, this option consists of a third-party DP facility with a short- term (up to six weeks) DP capability. For longer term recovery while the disaster-impacted firm is reconstructing its facility, a hardware-conditioned ready space is available to the customer. The ready space — an empty shell with lights and power installed — allows the customer the continuity of processing for up to six months. To use the ready space, the customer would have to provide its own equipment — usually leased.
Strengths - Immediately available; long-term availability; shared costs; test time available as a part of the contract agreement.
Shortcomings - Available on first-call, first-served basis; high costs — monthly fees and notification of disaster and daily usage fees; additional costs for on-line backup; hardware and software provisions and the organization’s requirements; transportation, meals and lodging costs.
ALTERNATE SITE, CO-OP OWNERSHIP
- This option is similar to the alternate equipped site option except that the facility is cooperatively owned by several member firms. In this option, the facility is made ready with the installation of both environmental and DP equipment.
Strengths - Long-term availability; shared costs; immediate availability; reasonable usage costs.
Shortcomings - Available on first-call, first-served basis; maintenance costs could be high; comparatively low return on investment; maintaining hardware and software compatibility is difficult; effective testing is difficult.
- This option requires total redundancy of the DP system.
Strengths - One hundred percent backup capability; long-term availability; immediate availability.
Shortcomings - Cost may be prohibitive.
ASSUME ALL RISKS VIA INSURANCE
- This option is self- explanatory — the organization assumes the risks and purchases insurance to cover the loss risks.
Strengths - Minimal capital expenditures.
Shortcomings - The time required to restore DP function could be inordinate’ the firm could lose its competitive edge and customer base; does not meet legal requirements.
ANY COMBINATION OF OPTIONS
- This allows for a modular approach by selecting the best part of any option based on the organization’s disaster contingency requirements. For example, a third-party standby facility may be used to backup batch processing; a service bureau may be used for data entry services; and the consortium agreement may be expanded to backup online and limited batch production requirements.
Strengths - May be best approach for the organization; builds on strengths of options; potentially cost-effective; addresses shortcomings; spreads risks over many options.
Shortcomings - Difficult to implement; requires much coordination; may be difficult to test on an integrated basis.
Al Passori is the Manager of Telecommunications and Computer Security for Amtrack. A former IBM Manager, he holds both a Bachelor of Science and Masters degrees from the University of Maryland.
This article adapted from Vol. 1 No. 3, p. 30.