Valuing Data and Information
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- Created on 27 March 2013
- Written by Steve Burrows
Our stewardship of “things” - assets of some sort - normally depends on value. We will take better care of a MontBlanc fountain pen than a Bic biro, we pay more attention to the management of large funds than the change in our pockets, and we apply far more rigorous accounting processes to the goods in our warehouses than the items in our stationery cupboard. In determining our approach to stewardship we pay significant attention to value, how then do we value the data and information we hold in our organisations?
A in 2012 calculated that in the average company data assets represented c. 49% of the company’s value. On the face of it this claim seems fanciful, IT industry hype - but is it?
What would be the impact on your organisation if it no longer knew who its customers were? Which orders were due for delivery? What monies could be invoiced? Suddenly data or information can appear to be very valuable.
What’s the difference between data and information and are they valued differently? In an earlier post I wrote “Information is data which has been processed and presented appropriately for the context in which it is to be used”. Information therefore has transient value, it is relevant for a purpose at a point in time. Some information may be persistently valuable, we can use it repeatedly, for instance a list of customers. Other information is very temporal, a list of outstanding invoices ceases to have value as soon as those invoices has been paid. Data however is the source from which information is manufactured, it is inherently persistent. The temporal nature of information and data is a factor in valuation.
This could be a very long article, so I’ll cut short the philosophising there. How do we value data and information? Basically we measure the worth of its loss. Ask yourself these questions, however improbable they might seem:
- What would be the financial impact on the organisation of losing its data? You can do this as a whole, or divide data into classes and value them separately, but don’t be fooled into the mistake of assuming that the sum of the value of the classes of data is the same as the sum of the whole.
- What would be the financial impact of losing data for a period - a week, a month? Essentially this temporal measure will indicate the value of ‘current’ information, that which you would need to use soon.
- What would be the cost of recreating lost data? For instance if you lost your customer records? How much research would you need to do to recreate them? Would you even be able to recreate them or would you be denied access to past customers unless they came to you again?
- What would be the impact on your organisation if one of your competitors acquired your data or information? If they knew what you had supplied to whom at what price, how many of your customers could your competitor convert into their customers and at what loss of value to you?
In answering these questions you may generate frightening numbers. If your business depends on repeat custom, either the supply of goods or services as most businesses do, you may conclude that the value of your data is a substantial proportion of the value of your business. The 49% claimed by Symantec above suddenly seems very possible, and it becomes easy to understand why such a high proportion of companies that suffer a major IT failure or data loss subsequently go out of business.
There are other questions you could ask, considering reputational damage, regulatory & legislative liabilities and a range of other factors. You can design your own valuation method appropriate to your needs and circumstances, but the financial questions are generally easiest to grasp.
Understanding the value of data and information is a pre-requisite to determining your approach to data governance, information governance and IT governance. The realisation that the IT manager may hold half the value of the company in his or her hands is sobering. It will change your perception of who they are, what they do, how they execute stewardship of what is most organisations most valuable asset, and how you supervise their execution of their responsibilities.
