The Value of Information Assets

Information has value to its owners , users, automated systems that must use it, and government agencies that regulate access to it. For example, Wal-Mart stores could not operate efficiently without a 30 terabyte data warehouse that tracks the cost, profit, shelf life, and other metrics associated with every product sold in every store during the past five years .

Major domestic and international airlines could not efficiently schedule and crew billions of dollars of equipment, nor operate their revenue capacity maximization models without the use of sophisticated databases and information systems valued over several billion dollars of replacement cost.

The business model for Visa, MasterCard International and American Express is based around card use data collection, account tracking, fraud analysis, customer billing and receipt collection information for hundreds of millions of credit and charge cards. The collective value of their databases and information assets is in the hundreds of billions of dollars ” more than the annual budgets of all nations of the world, except for the U.S. and Japan.

Wall Street stock trading and financial institutions would not be able to open for business without having confidence in the accuracy of information used to conduct trades, base valuations on, or estimate earnings against. Accurate and trusted information is a core underpinning in market transparency and investor confidence.

Where does information derive its value? In part, from being able to infinitesimally leverage information for financial, operational, analytical, managerial , and social advantages. Once collected and verified as accurate, the value of information increases every time a successful transaction or usage occurs due to the cascade effect of each transaction triggering or enabling a second transaction and then a third, and so forth over time. The single transaction of selling 100 shares of stock, for example, may trigger purchases of other stock shares, purchases of capital goods such as automobiles, trucks , aircraft or property, which over time trigger purchases of other stock, maintenance and servicing of vehicles and property and employment of staff members . When viewed as a complete financial and transaction picture from beginning to end, accurate information enables transaction-based financial gain, marketing leverage, direct customer communications, and collaborative partnerships that would be prohibitively costly or complex to establish and support.

The concept that information has value was crystallized by Dr. David Nolan in his Harvard Business Review article in 1982 (Nolan, 1982) and revised by him and others since then. Recently, Nolan (2001) has presented the concept that the value of information systems to organizations increases through a series of stages of technology evolution, from the mainframe era of 1960 to 1980, to the Micro era of 1980 to 1995, and the network (Internet) era of today. Inherent in the changes in technology is the ability to expand the use of information for beneficial and sometimes unforeseen purposes. Nolan reported that Microsoft used the Internet to distribute to, and communicate with, 400,000 beta customers of Windows 95 software. Responding to inputs received from these early users enabled Microsoft to redesign and redefine how the product worked prior to its final release to the market. Being able to use the Internet as a distribution system and customer communications vehicle, and linked to a integrated tracking systems permitted a beta test by hundreds of thousands of people ” previous releases involved a small percentage of customers which did not provide a test environment as diverse as Windows 95 had.

While most executives and senior managers agree that information does indeed have value, they often calculate the value based on the cost to collect, maintain and manage it, rather than the potential value to be derived by the organization through leveraging the information to achieve business objectives and support their customer s needs, sometimes in ways previously unintended . For example, Gateway and Dell ” initially manufacturers of personal computers ” now use their massive customer databases to market plasma televisions , personal organizers, digital music players and other products not included in their original business models.

Since 1996, many e-gov initiatives have been aimed at leveraging and expanding the value of government provided and collected information. Many citizen- facing Web portals have been created by the U.S. Federal Government to provide access to tax refund information, contracting opportunities, park reservation information, transportation licensing and permits information, the status of pending legislation, electronic sale and distribution of government publications , and many other purposes. Understanding that physical transactions can often be converted into electronic ones has leveraged government databases into 24 x 7 access points without the traditional overhead costs for staffing, physical space and communications systems.

Even small companies and organizations may have substantial value in their customer and partner information. Manufacturers and providers of unique goods and services can often leverage information on customer requirements or preferences into new business markets, similar to what Gateway and Dell have done. Information, once captured and validated for one purpose, can be combined with commercially available third-party databases to obtain historical trending and cross-product opportunities. For example, piano manufacturers may purchase a database from a manufacturer of high fidelity recording equipment to see if a customer might want to record their musical performances . Makers of batteries for digital cameras and cell phones are very interested in databases of customers from camera stores and cellular phone companies. Insurance companies that offer theft and damage protection polices for these products would also be interested in any of this information.

The concept of information having value is important to business and government. On a fundamental basis, if information has little (or no) value to the organization that owns or collects it, there is little reason to spend resources trying to protect it. Making a determination about the value of the organization s information is an incumbent responsibility for executive and senior management, as the decision drives multiple actions to either limit or permit access to information, systems and networks. Establishing the exact value of the information is not as important as determining if there is some ” or great ” value to be protected against loss, misuse or corruption.