In today’s world in every organization, there are several people making decisions in their specific roles. Some of those decisions are based on facts, whereas some are purely based on individual experiences and capabilities. The latter category of decisions is what scares every organization’s CIO/CEO in the competitive environment that we live in today. Information Management (IM) is the field that is aimed at ensuring that the perceptions, gut feeling and non-fact based decisions are minimized, if not eliminated. Of course, it comes with its own heavy costs and investments, and top management expects to see the returns on it.
This article looks at the benefits of Information Management, the need and the challenges in the information world. The concluding section addresses the bigger question on ROI, and explores how one can look at measuring the benefits to justify the huge investment in Information Management initiatives.
What is Information Management?
Information Management can be defined as a process of establishing the organizational principles for various data life cycles across both structured and unstructured data sources, instituting a committee to govern the principles, and setting up the processes and procedures to harness the data such that meaningful business insights are derived and delivered to the consumers at the right time in the right format. This is depicted in Figure 1.
Figure 1: Enterprise Information Management
IM brings an enterprise the ability to factor in the key facts hidden in the unstructured data sources such as documents and emails that is otherwise overlooked while making corporate decisions. Organizations must view data as an asset and dedicate a panel of members to ensure that IM initiatives are in line with business objectives, oversee the IM initiatives and resolve any issues in its implementation. There is no single tool or technology that can serve Enterprise Information Management (EIM); hence, an enterprise must standardize the tools and technologies, data definitions and metric definitions that will serve as foundation for successful implementation of IM initiatives.
Why Should Information be Managed?
Business growth, mergers & acquisitions and e-commerce are some of the factors that drive spikes in business transactions. As a result, organizations witness multiplication in their data volumes in a short span of time. While the enterprise data volume is ever increasing, the hardware memory cost is ever decreasing. This could be one of the reasons why IT initially failed to think about managing the ever-growing data volumes. Businesses are under tremendous pressure to derive meaningful information out of the transactional data, and that drives IT to manage the exploding data volumes.
Figure 2: Turn-Around Time (TAT) for Data to Information Conversion
The process of deriving information out of data is not simple as it sounds. Some of the enterprise data could be managed by vendors outside the organization. There could be multiple copies of same data. For instance, customer data could be available in two or more systems. Information needs for strategic decision making usually require data from all over the enterprise. Data must be collected in a common place where it can be cleansed and business rules can be applied and populated in an analytical data store.
Data from these analytical data stores is then queried, processed and massaged according to the business needs to derive the meaningful business information, and it is presented to the end users in a visual manner that is easy to comprehend for decision-making purposes. When not managed, the cost of deriving the information out of data is very expensive; also the time window (TAT – Turn-Around Time) between data creation and information delivery/action taken is huge as depicted in Figure 2.
Advantages of Well-Managed Information
Data/ Information management is the key that enables an enterprise realize numerous business benefits. A CIO research study reveals the following as top business benefits of well-managed and trusted information1:
- Improve operational efficiency
- Enable corporate performance management
- Maintain IT cost control and increased revenues
- Improve customer satisfaction
Additional benefits that can be attributed to well-managed information management are:
- Root-cause analysis and fact-based decision power
- Equip business users with reporting and analysis capability
- Allow ABC analysis to track lost opportunities, or hidden costs
- Realign strategies based on sales/marketing analysis
- Eliminate assumption-based decisions
- Optimize business process and inventory
A comprehensive SWOT analysis of why an enterprise should adopt IM is presented in the Figure 3.
Figure 3: IM SWOT Analysis
An enterprise must embrace IM because it offers various advantages. One of the key requirements of today’s businesses is that they want to eliminate or reduce their dependency on IT; it can be realized through successful implementation of IM. IT, on the other hand, need not run from system to system to give business what they want. With IM, all the information needs can be sourced from one system. It also helps you leverage unstructured data (such as customer complaints in emails, market research study in a document) for effective decision-making purposes.
Any IM initiative in the enterprise requires management support in terms of budget, dedication and, more importantly, patience. The reason why patience is cited as support factor is that many of the IM value propositions are intangible. For instance, when the call center agent is provided with an instant access to the customer data, the efficiency of the customer interaction increases. Such benefits cannot be measured directly. IM initiatives cannot be implemented using a single tool or technology. It requires a variety of tools and technologies to implement – which means it demands some big bucks be spent, for which again the management support is essential.
Adoption of IM opens up a set of opportunities for enterprises. IM can help business understand its customers, their behaviors and their preferences; thus, it directly gives business an opportunity to serve the customers better and retain them. This will again directly influence the performance of the business and the profit margin. When the business grows, eventually it gets into mergers and acquisitions (M&A;) to tap the new markets; IM can help complete M&A; formalities faster and smoother.
The risks involved in not adopting IM in the enterprise are very menacing. Since IM is vital in understanding the customer, not adopting it could potentially mean business is jeopardizing the customers. IM also helps an enterprise standardize the enterprise tools and technologies; thus when not embraced, an enterprise faces the risk of getting into poor vendor management. Regulatory authorities call for highest level of transparency in the business, and the new regulations are often introduced. To make the matter worse, local and global regulations are not always the same. IM with its strong metadata foundation can help an enterprise adhere to changing regulatory requirements.
Differences Between Data and Information Management
Data Management (DM) is a subset of IM. Data and Information Management disciplines share a “producer : consumer” relationship. The focus of DM is mainly on creation and maintenance of operational data, whereas the focus of IM is to utilize the data created by business operations for decision making.
Effective DM principles enable the conversion of operational data into meaningful business information that is delivered to the strategic, tactical and operational level decision makers in the appropriate format and in the right time.
Challenges Involved in Information Management
Factors such as global and local regulatory requirements and exploding data volumes in the organization drive the business to undertake IM initiatives. Any attempt to manage the information in an enterprise comes with a set of challenges. Some of them are:
- Conflicting data definitions across various lines of business (LOBs)
- Incomplete and inaccurate data
- Lack of metadata
- Lack of data ownership
An enterprise information management strategy should offer comprehensive set of functions such as data quality, data governance and also a well-knit plan to address every possible challenge in management of information.
ROI – BI Perspective
Every business manager or top management funding any investment into IT business intelligence (BI) initiatives has this request: Show me the returns on the dollars we are investing into BI every cycle. We wish there was an easy way to get that answer or that we could look at our financial accounting books and provide a figure. Top management expectation is the level and amount of contribution from IT toward the bottom line of the organization.
The real challenge in doing ROI calculation on BI investment is the dynamic nature and the constantly moving target with unmarked boundaries. The ROI calculation works perfectly well when you have well defined scope and boundaries of initiatives. Failing that, we can double-count the returns that have already been accounted for in other non-BI initiatives, and the ROI figures look much higher compared to organizational ROI.
One more challenge that BI ROI calculation has is the pervasive nature of BI. We won’t do justice if we treat BI as one single application; it’s a combination of multiple processes and systems that need to interact together to produce the desired outcome. It’s an ongoing process, and not a one-time application development cycle that ends – hence, it is even more difficult to do a cash flow analysis and come up with the ROI figure.
Whereas if the BI is being looked as infrastructure, then the calculation logic changes to Total Cost of Ownership (TCO), which includes following:
- Hardware costs
- Software license costs
- Employees, consultants costs
- Ongoing maintenance costs – present and future
Before one jumps into BI contribution to bottom line figures, one needs to classify and identify the tangible and intangible benefits. One way to do that is to categorize into following:
- Tangible or measurable benefits – e.g., % effort reduction in providing reports with information for decision making, % resource savings like paper reports getting replaced by online or multi-channel delivery BI reporting, % effectiveness of the marketing campaigns
- Indirect tangible benefits – e.g., improved customer satisfaction allows for cross sell opportunities, and creation of new service line offerings
- Unexpected or undiscovered benefits – e.g., through voice of customer analytics using the public blogs, organization discovers the performance issues with specific product
- Intangible benefits – e.g., satisfied customers, higher employee motivation/job satisfaction, improved information sharing
Simple mathematics formulae can be worked out to see the ROI or justifying the investment if we are looking at TCO with IM as infrastructure:
Formula 2: Weigh the other two intangible benefits with the difference you get in Formula 1. Yes it’s not an apple-to-apple comparison, but will help you prioritize the organizational needs and lead you closer to the decision.
Alternately, if TCO model doesn’t suit your organization, there’s a little more complicated way of arriving at the ROI: For each system/application/resource within IM space, one needs to calculate the ROI using cash flow statements, eliminate the double counting, and then average out for final ROI figure. Be aware that this is more prone to errors.
Summary
Given the challenges in Information Management space to justify the returns on bigger investments being made, a systematic approach of deciding if IM is being looked at as infrastructure or another application will help in measuring the benefits. The methods presented here are not the only ways different organizations provide their justifications on investment; however, the classification of benefits into tangible and intangible is the key to success.
References:
- CIO2CIO Global Research Study: Business Intelligence and Master Data Management, July 2007.