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COMPUTING

Be prepared: Disaster-recovery plans essential to success

August 25, 1999
Web posted at: 3:06 p.m. EDT (1906 GMT)

by Ted Smalley Bowen

From...
InfoWorld

(IDG) -- An ever-increasing amount of business is only as stable and reliable as the IT foundation on which it rests. This makes it critical for IT managers to know how to protect the business if that foundation fails.

Disaster-recovery plans and business insurance are two ways to do this. They can dovetail to protect organizations in emergencies, but they also require IT managers to coordinate closely with business leaders.

Disaster-recovery services are billed as insurance for your IT operations, and by extension your overall business, in the event of natural disasters or other interruptions. The services can include backup systems maintained at a secure site; standby facilities; or any systems and personnel needed to weather outages.
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"We can't ship a box or buy or inventory anything without the system running. That's why we spend so much on making sure the system is reliable," says Glenn Wood, vice president of IS at Allison Manufacturing, a $70 million, 1,000-person clothing manufacturer, in Albermarle, N.C.

Although the practice of disaster-recovery planning has yet to mature as a discipline, companies are increasingly seeing its importance, according to analysts and vendors.

"We're seeing a greater understanding of this in the industry as applications and business processes become more ingrained in the overall operations of businesses," says Steve Higgins, global business development executive at IBM's Global Services division, in Sterling Forest, N.Y. "We're seeing it with [enterprise resource planning], supply-chain management, and connections with customers and partners via the Web."

More backup plans

If a business system ultimately fails despite a disaster-recovery plan, business insurance often comes into play. These insurance policies usually cover the expenses associated with weathering crises and, depending on the policy, losses attributable to the cessation of business.

However, in order for disaster-recovery plans and business insurance to work properly, someone needs to track the relevant small print in the applicable contracts.

"Know your deductible as it applies to disaster-recovery costs," says Mark Harclerode, manager of systems operations and network control at Coca-Cola Enterprises, in Atlanta.

When one of the beverage giant's plants in Cincinnati was soaked in a flood last year, it was discovered that the company's business-interruption coverage extended to IT systems recovery costs. Reassured, the group charged with deciding the fate of the facility's moist servers and routers spent five weeks debating whether to replace or repair the equipment, while backup IT operations hummed away in the recovery service data center.

After racking up about $208,000 in disaster-recovery charges during that period, the group dutifully submitted the documentation to the insurer, only to discover that the deductible for such costs was $200,000.

That sum barely registered on the company's overall risk-management radar screen, according to Harclerode. Still, such experiences highlight the need for IT departments and corporate risk management centers to coordinate their efforts. Coordination may also help reduce the cost of insurance in some situations.

"Anecdotally, some customers get generous rates, having proved to their insurance companies that they have a disaster-recovery plan in place," says John Nevola, manager of service delivery in North America at IBM's Global Services division.

If a company wants to ask for a discount, IT will have to work closely with the business staff in charge of insurance.

For example, Allison Manufacturing's parent company, AIM, negotiates its business-continuity coverage centrally, so any bargaining for rates based on disaster-recovery plans would have to happen at that level, according to Wood.

"It should be [cause for a discount]. It is pretty big bucks, if we have to do without the data center and end-user equipment, and replace those systems," Wood says.

Although some insurance companies may weigh disaster-recovery plans in their rate calculations, the practice has yet to be codified.

"We have 10 computer centers, which means there are 10 places for possible failures. We're reducing that to eight. Shouldn't they reduce our rates?" asks Coca-Cola's Harclerode.

In some cases, a discount isn't the issue: Having an IT disaster-recovery plan may be required before a company can get business coverage in the first place, analysts say.

How do you prove to an insurance company that you have a solid plan?

"Most companies need to prove to their board of directors and accounting companies that they're recoverable, so they have audits performed. That information is available to insurers," IBM's Nevola says.

The Y2K factor

There are signs that disaster recovery is coming to the attention of more business managers, including those at senior levels, partly due to the steady drumbeat of year-2000 issues.

"[Year 2000 is] raising the visibility of disaster recovery to the highest level," says Donna Scott, an analyst at the Gartner Group, in Stamford, Conn. "And they're not just looking at it as a matter of recovering from a computer failure, but as a need for contingencies for how they accomplish all of their work."

But although year-2000 issues can serve to promote the overall concept of disaster recovery, the technical practice of date-field remediation bears scant resemblance to data-center and systems recovery, Harclerode says.

And although year-2000 planning has helped spread the word about IT-related business recovery issues, IT departments haven't necessarily been handed blank checks for all disaster-recovery efforts.

"There hasn't been a year-2000 windfall for other areas," Harclerode says.

Harclerode notes, however, that the personnel commitment to disaster-recovery concerns went from half of one position to two-and-one-half positions after the Cincinnati episode was successfully resolved.

Contingency plans on the rise

Enterprises have been spurred to devote more attention to disaster-recovery strategies by such trends as the increasing dependency of core business functions on information technology, year-2000 contingency planning, and high-profile online business crises.

As a result, proposals for disaster-recovery plans (also known by their more reassuring marketing term, "business-continuity plans") are becoming more likely to find a receptive audience among senior business management.

"That's where they have the best chance of getting funding, since it's a business and not just [an] IT issue," says Donna Scott, an analyst at the Gartner Group, in Stamford, Conn.

Scott says disaster recovery is a well-established concern in many corners of the enterprise: Eighty-five percent of Fortune 1000 companies have some sort of disaster-recovery plan.

Service providers also note interest among midtier companies, many of which are pursuing such strategies as part of online-business ventures. The fact that virtual businesses are virtually dependent on their systems and network infrastructure highlights the urgency of contingency plans.

Companies that provide outsourcing services, and their customers, are also heeding the call to arms, according to vendors. On the systems side, disaster preparedness usually entails backing up central sites and WANs, but often does not extend to each LAN and desktop system, Scott says.

Ted Smalley Bowen is InfoWorld's Boston bureau chief.


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