Exploring the realm of data economics: understanding infonomics
In the realm of business and information management, a new approach to IT management is gaining traction – Infonomics, a concept pioneered by Gartner analyst Doug Laney. This approach recognizes the value of information as a crucial asset in today's data-driven world. Traditional accounting principles have long struggled to quantify the economic value of information assets. Laney's research supports this argument, finding that standard practices do not provide for the capitalization of information, making it difficult to add information to the business's balance sheet as an asset. However, Laney envisions a future where businesses will manage their information assets much like they do their financial assets, in what he calls 'information banks'. These information banks would store, manage, and lend out a business's information assets, similar to how banks manage financial assets. Laney first conceived this idea ten or eleven years ago, and today, hosting providers are already offering storage services for data. Laney predicts they will evolve to manage, cleanse, offer analytics, enrich with outside sources, and lend information to other organizations without exposing private information. The market value method is one of the valuation techniques for information assets. It works for assets with a defined market, such as name and address data, marketing preference data, and certain kinds of competitive intelligence. To measure the income value, a company can conduct experiments by giving some employees access to specific information and comparing their performance to those without access. However, the value of information is not always straightforward. It depends on context and can be reproduced easily, making it challenging to measure the impact of IT investments on information quality, timeliness, or accessibility. Organizations often calculate the return on investment of technology investments by focusing on cost-reductions or operational output such as productivity. But Laney suggests that thinking about the value of information could help businesses assess the economic potential of data from external sources, such as commercial data sources, data from partners, or social media data. The US Financial Accounting Standards Board specifically asserted that information could not be reported as an intangible asset after 9/11. The US insurance industry also excluded electronic data from general commercial liability after the same event. These decisions highlight the challenges businesses face in valuing their information assets. Laney's infonomics approach is not just about cost justifying IT investments. It is also about improving information management practices and justifying IT investments in a broader sense. This approach is gaining interest among clients, with applications in mergers and acquisitions, improving information management practices, and justifying IT investments. Figuring out how best to apply these techniques and for which circumstances is still a work in progress. But one thing is clear – the economic potential of information is vast, and understanding its value could revolutionize the way businesses operate.
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