To value IT properly requires viewing the enterprise as an evolving ecosystem CIOs can't escape management's insistence on establishing and measuring the business value of information technology. Despite elegant, academically sound metrics, most IT value equations fail because traditional measures attack the problem backward.
To put it plainly, IT by itself has no inherent value. However, the information that IT makes available is priceless. Businesses, or lines of business, must first establish the value of their information requirements before technology is made a part of any value equation.
Therefore, proper understanding of and agreement on value are crucial to managing IT strategic planning. To help CIOs encourage their companies to measure the value of information rather than the value of IT, Meta Group has developed the "information ecosystem" model. The model, which expands on concepts presented by James F Moore in The Death of Competition (HarperCollins, 1996), rests on the premise that to fully exploit information technology, companies, business units and individuals must share information to catalyse business advantage and chart strategic direction.
Like Moore's business ecosystem, the information ecosystem model is a biological metaphor that recognises the co-dependency of everything within an ecosystem. Just as in our natural environment, where external and internal influences on an ecosystem force all living things in it to evolve, so influences on the information ecosystem change interactions among employees, customers and business partners - the members of an information ecosystem.
Paradoxically, the very same members of the ecosystem who require information to successfully interact with the enterprise are simultaneously the sources of information within the ecosystem. Consider how an external force, such as the increasing rate of innovation, is forcing companies to adapt more rigorously to markets, the economy, regulations and competition.
The next generation of electro-nic commerce will require companies to treat suppliers and competitors as partners and interact with them at a higher level.
For example, they might share application-layer software to manage knowledge, logistics and inventories. Other external business forces such as "coopetition" and collaboration will increase the necessity of aligning business goals with IT. No business, and certainly no IS organisation, can survive in the future by trying to maintain total independence. Once an enterprise is seen as an organic system in which every part strongly affects every other part, the walls between business departments seem to melt away. Since the company is perceived as a whole, improved alignment within the company concentrates attention on valuating information and not on technology applications and their costs.
What's more, the ecosystem model promotes higher-level and quicker buy-in among participants facing innovation; the crucial connections among IT solutions, business information and business drivers are more easily seen.
The information architecture of an organisation is the linchpin between the "I" and the "T". As part of an ecosystem, an information architecture must encompass information principles that cross lines of business. Such an architecture must also regulate the flow, timing, depth, breadth and ownership of information. Finally, it must demarcate levels of responsibilities among the corporation's customers, partners and employees for the maintenance of that information.
External pressures on an information ecosystem encourage the evolution of a "living" IT architecture that, like a complex organism, can adapt to an ever-changing environment. Rather than pursue architecture development by project, IS organisations must buy into the need to plan architectures designed to accommodate swift change.
Old architecture development methodologies that had an IS shop that sequentially defined the business need, developed the appropriate application architecture and then implemented the supporting infrastructure will not work in today's business environment. Instead, IS must follow an adaptive architecture methodology that stipulates simultaneous definition, development and implementation.
Because of the need for swift flexibility, an adaptive architecture methodology actually increases standardisation at the lower levels of infrastructure, such as communications and databases, and encourages increased responsiveness to changing business needs at the higher levels.
Such an architecture will serve as a predictive tool for technology acquisitions that meet yet-to-be-developed standards and will encourage development of a common language used by business and IS for business plans and funding discussions. A common language enables the articulation of solid, value-added ROI links among information requirements, business goals and the technology necessary to achieve them. Information and value At the heart of the information ecosystem is the recognition of the dependence on information as a driving force behind any decision. Information is a corporate asset to be planned, budgeted, acquired, used and retired. However, the same senior IS executives who give lip service to "information as a corporate asset" are reluctant to completely endorse "information value". The irony of all this is that most attention-loving proponents of catchy phraseology insist we are in the midst of "the Information Age".
Although Meta Group believes that most IS and business executives do not consciously ignore the value of information, we also believe there have been no decent tools for determining its value and its role in the strategic planning process.
IS has failed in the past by trying to place a value on something most business people don't understand - technology. Although the information ecosystem model is not presented as a panacea, we believe it helps project prioritisation by placing the business value emphasis where it is easiest to understand-on the business information.
While organisations continue to encounter difficulty putting an absolute dollar figure on a specific piece of information, they can easily rank information needs and make choices based on a hierarchy. For example, although trying to determine the worth of information is difficult, most organisations can decide if it is better to have access to information instantaneously for $1 million or access to information that's 24 hours old for $250,000.
Executives will make that decision; IS's role is to highlight information needs and offer different information-based alternatives to business executives.
Rather than suggest the solution, IS must present a variety of ways to provide the necessary business information, each with a separate price tag, and insist that business executives choose.
Habits within an organisation transcend all other behaviours, planned or unplanned. The ecosystem as a planning model will seem senseless without understanding larger corporate cultural forces. This is especially so for an organisation's "information society" - the map of how information is moved and owned within an enterprise. The four kinds of information societies are: 1/. Monarchy, in which one person controls all information2/. Anarchy, in which people control all the information they can personally garner3/. Feudalism, in which a few powerful groups exercise control, and4/. Federalism, in which shared information is managed centrallyA federalist information society is most effective because in a corporate culture where sharing information is ordinary, information has a significant impact on the interactions among employees, customers and business partners.
Dale Kutnick is president, CEO and research director of Meta Group, and Karen Rubenstrunk is vice-president of the Meta Executive Council
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