If you were to look at the balance sheets of most Global 2000 companies, you would see many varied entries for assets such 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 percent of these executives have their compensation directly linked to shareholder value. The vast majority of chief executive officer (CEO) and chief information officer (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 nonphysical 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 percent of its revenue on information technology (IT) systems (see Figure 1).
Figure 1: IT Spending By Industry
This means that a company with $1 billion in revenue spends, on average, $53 million on its 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 boardroom. For example, most companies' IT development processes 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.). The "heroes" then embark on a perilous journey to understand their existing convoluted systems' architecture, work many long hours, make business assumptions with little or no common business understanding, and then hope that their efforts will be successful. This situation explains why the vast majority of large IT initiatives fail at a 60 to 75 percent 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. At most companies, repeatable IT processes are repeatable only within a single group of developers. Thus, the 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. 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 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. Because it centrally and completely documents all data and applications, a meta data repository is absolutely essential for repeatable and transferable IT processes. 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.
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