Published in TDAN.com January 2003
If you were to look at the balance sheet of most any Global 2000 company, you would see many different and varied entries for such assets as property, cash, equipment, accounts receivable and my
favorite category, Goodwill. Unfortunately, one item that is not seen in the asset section of the balance sheet is Data. In the Information Age, data is every bit as valuable as property, equipment
and Goodwill. Low quality data, mismanaged data, redundant applications and poorly built applications prevent companies from effectively managing their other assets. For example, how can a company
convert accounts receivable into cash when the accounts receivable system has transaction records with data quality issues that prevent them from becoming billable? Moreover, all of the needlessly
redundant applications create a substantial cost drain on the enterprise’s cash assets.
This is an especially important concept as all companies are desperately trying to increase shareholder value. Corporate executives spend endless hours looking for ways to increase their
company’s value as 95% of these executives have their compensation directly linked to shareholder value. The vast majority of Chief Executive Officer’s (CEO) and a Chief Information
Officer’s (CIO) compensation is based on the performance of the company. These corporate executives realize that shareholder value is not just tied to the assets on the balance sheet. In
fact, a great deal of shareholder value is achieved through non-physical measures (e.g. intellectual capital, customer loyalty, brand recognition, etc.). Moreover, CEOs and CIOs are using
successful technology implementations as trophies to improve shareholder value by enhancing their company’s reputation as a technological leader in their industry and by attracting better
employees that want to work for sophisticated organizations.
Understanding and leveraging technology is critical for any enterprise and most organizations have built systems to manage almost every aspect of their business. Corporations have built payroll,
accounts receivable, order entry, marketing campaign management, human resources, logistics, invoicing systems and even systems to track the placement of office furniture and employee holidays. The
average company spends 5.3% of their revenues on their information technology (IT) systems (see figure below).
This means that a company with $1 billion in revenues spends, on average, $53 million on their IT systems. There are even several Fortune 100 companies whose IT budgets approach or exceed $1
billion. Despite this massive investment, most companies do not have an application to systematically manage these systems.
“We Build Systems To Manage Every Aspect Of Our Business, Except One To Manage The Systems Themselves”
While spending these exorbitant amounts on IT, most companies still do not value data as an asset, whether on the balance sheet or in the board room. For example, most companies’ IT
development process can best be described as “piecemeal.” Most corporations build systems through “heroic effort.” A group of developers and business users get together to
implement a new application (e.g. data warehouse, customer relationship management, enterprise resource planning, etc.). Our “heroes” then embark on a perilous journey to understand
their existing convoluted system’s architecture, work many long hours, make business assumptions with little to no common business understanding, and then hope that their efforts will be
successful. This situation explains why the vast majority of large IT initiatives wind up failing at a 60% – 75% rate. Even those initiatives that are successful may not be repeatable, meaning that
the application development process is not in place and the standards for building the application have not been formulated or documented. Typically those companies with repeatable
IT processes are repeatable only within a single group of developers. Thus their work and effort cannot be transferred to other groups within the company so that the success can be
duplicated. Even with this failure rate being so high and the investment in IT being so great, most companies still do not manage their applications in a systematic fashion.
“The System That Manages a Company’s Systems is a Meta Data Repository”
The system that manages your company’s systems is a meta data repository. A meta data repository catalogs all of the applications, data, processes, hardware, software (technical meta data),
and business knowledge (business meta data) possessed by an organization. This information (meta data) can then be utilized to identify redundancies before they occur and to eliminate duplication
that already exists. A world-class meta data repository dramatically improves data quality by providing a full understanding of the data and is absolutely essential for having repeatable and
transferable IT processes as it centrally and completely documents all data and applications. Business executives are beginning to realize the importance of managing their data as an asset and thus
look to the meta data repository as the key technical solution for data asset management.