G0******* Why and How to Measure the Value of Your Information Assets
Published: 4 August 2015
Analyst(s): Douglas Laney
Information is a business asset to be managed, deployed and valued. Chief data officers, chief analytics officers, CIOs, chief marketing officers and CFOs should use Gartner's information valuation methods to measure information usefulness and monetary value.
Key Challenges
■Most executives readily admit that their organization mismanages its information assets, particularly compared to how traditional assets are managed. This leads to missed business
opportunities and undue expense.
■Currently, information is not recognized by the accounting profession as a balance sheet asset, which means few organizations have a true sense of the value information generates — or could generate if optimally managed and deployed.
■Research from Gartner and several academic researchers suggests that information-centric companies tend to outperform their peers and that financial markets tend to favor them, but
business leaders have no approach to measuring this hidden value.
■Most IT leaders struggle to demonstrate the economic benefits of key information management-related initiatives, such as master data and metadata management, data quality, information
governance, information architecture, information infrastructure upgrades and even business intelligence or analytics.
Recommendations
■CxOs and corporate boards should require that information is valued by their organizations as an asset (and not just talked about as one).
■CDOs and CAOs with the guidance of CFOs should establish a standard methodology for measuring the actual and potential economic value of key information assets to their
organizations. Adopt one or more of Gartner's suggested information valuation models and
perform these measurements periodically.
■IT and business leaders should use their information valuations at least to help prioritize and budget IT and business initiatives, improve information management culture and discipline, and
to make informed information strategy, life cycle and other decisions.
Table of Contents
Strategic Planning Assumptions (3)
Introduction (3)
Analysis (5)
Adopt Information Asset Valuation Methods to Improve Information Management and Business
Performance (5)
Apply Fundamental Information Valuation Models to Prioritize and Improve Information Management
Discipline (6)
Intrinsic Value of Information (IVI) (7)
Business Value of Information (BVI) (8)
Performance Value of Information (PVI) (10)
Apply Financial Information Valuation Models to Hasten Their Improved Economic Benefit (12)
Cost Value of Information (CVI) (13)
Market Value of Information (MVI) (14)
Economic Value of Information (EVI) (16)
Gartner Recommended Reading (19)
List of Tables
Table 1. Sample Calculation — Intrinsic Value of Information (8)
Table 2. Sample Calculation — Business Value of Information (9)
Table 3. Sample Calculation — Performance Value of Information (12)
Table 4. Sample Calculation — Cost Value of Information (14)
Table 5. Sample Calculation — Market Value of Information (15)
Table 6. Sample Calculation — Economic Value of Information (18)
List of Figures
Figure 1. Selecting an Information Valuation Method (6)
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Strategic Planning Assumptions
■Through 2015, more than 90% of business leaders will view content information as a strategic asset, yet fewer than 10% will quantify its economic value.
■By 2016, 30% of businesses will have begun directly or indirectly monetizing their information assets via bartering or selling them outright.
■By 2017, 80% of chief data officers will strive to maximize the value of information while they continue working to minimize its risks.
■Through 2018, more than 75% of chief data officers will not report to the CIO or other IT leader.
■By 2020, information will be used to reinvent, digitalize or eliminate 80% of business processes and products from a decade earlier.
■By 2020, 30% of data will be prescribed provenance, business, security and value metadata at the time of its creation.
See "100 Information and Analytics Predictions Through 2020" for these and other related Gartner
strategic planning assumptions.
Introduction
This document was revised on 17 December 2015. The document you are viewing is the corrected
version. For more information, see the Corrections page on gartner.
Imagine a retail manager with no record of his store's inventory and no way to gauge its value, or
consider CFOs with no record of their companies' financial assets, nor their value, or an HR
executive with no company directory, employee ratings nor compensation data. This would seem
ridiculous — but that's the state of information management in most organizations today.
CIOs typically lack any reliable inventory of what information exists throughout the organization, for
example, where it is, what it means or the measurement of its value. Yet "information" is the CIO's
middle name — and we are in the midst of the information age.
Physical assets, financial assets and even certain intangible assets like patents and copyrights are
inventoried, measured and valued on balance sheets. It is the law and has been for corporations
since the 1930s.1 Even a company's workforce, regarded as "human capital" since the 1960s, is
also measured, valued and reported.2
So why not information?
Information meets the formal, established criteria of a balance sheet asset. Accounting standards
bodies (for example, the American Institute of Certified Public Accountants [AICPA], the Financial
Accounting Standards Board [FASB] and International Financial Reporting Standards [IFRS], among others)3 each define an asset similarly as having the following characteristics:
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■Something owned and controlled by an entity as a result of past events
■Something exchangeable for cash
■Something that can generate economic benefits for that entity
However, archaic accounting practices (for example, generally accepted accounting principles
[GAAP] and IFRS1) dating back to the post great depression era of standardized fiscal reporting4
practices, to-date disallow the capitalization of information assets on financial statements. Even as
the value of other intangibles such as copyrights, trademarks and patents are measured and
reported, the increasingly critical asset of organizations in every sector and the namesake of the
information age is not.
In Gartner's view, this long-standing failure of the accounting profession to acknowledge
archaic
information as an asset has given rise to the general lack of information management discipline
among most organizations. Moreover, it has resulted in most organizations failing to generate nearly as much economic value as is possible from their data. There is a certain breed of infocentric and
infosavvy company that demonstrate leading practices in information management, yielding market-to-book values far above the norm.5 Yet this value is not formally reflected — anywhere.
Gartner contends that formal information accounting practices (specifically, measuring the value of
information) is a significant step for most of our clients in realizing the potential benefits of their
available information assets. The old adage "You can't manage what you don't measure" is very apt in this case.
However, since no such established models exist, as part of our pioneering research into infonomics over the past decade, Gartner has worked with dozens of clients, accounting and economics
professionals in developing and implementing a set of practicable approaches.
Currently, although international accounting standards for valuing information are not imminent,
financial analysts have begun valuing businesses in-part based on their wealth of information assets and information-related capabilities.6 We expect this trend to continue.
Nonetheless, Gartner recommends and has worked with organizations to measure the value of their information assets for a variety of reasons. These include:
IT-related benefits
■Improving the management of information.
■Smarter prioritizing of information-related initiatives such as data governance, analytics, retention and archival.
■Creating a common language for IT, business leaders and CFO to communicate about information.
■Justifying and proving the benefits of IT, information-related and business initiatives.
■Driving information culture, leading to improved information-related discipline.
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Business benefits
■Improved economic benefits from one of the enterprise's most underutilized resources.
■Achieving a consistent understanding of the value of all assets for executives — not just GAAP assets.
■Driving improved corporate market valuations.
■Making an impression on investors and potential business partners.
■Monetizing data directly by selling or bartering with it.
■Becoming a more infocentric business (specifically, decision making and process automation/ optimization).
■Innovating with information to develop new products and services.
Analysis
Adopt Information Asset Valuation Methods to Improve Information Management
and Business Performance
To assist our clients in putting infonomics principles into practice, we have collaboratively
developed a variety of methods to compute the value of an information asset. These include both
fundamental and financial valuation approaches. Our fundamental models consider the quality-
related aspect of information or its impact on alternate performance indicators. Our financial models measure value in monetary terms by adapting accepted methods for valuing traditional assets.
When adopting financial models, solicit the support and involvement of your financial organization.
Some of these methods adapt acknowledged approaches for asset valuation, although none have
been accepted or endorsed as yet by any accounting standards bodies. For now, the models are
exclusively for the internal use of enterprises in gauging and comparing the value of their
information assets. This type of analysis may then be used to help improve efforts related to data
collection, management and deployment — and as such, it is not the measure itself that is as
meaningful as:
■The delta between the realized and potential value of an information asset.
■Tracking the appreciation or depreciation of the value of an information asset over time.
All asset valuation-related methods (for example, IRR, economic value added [EVA])7 for any kind of asset are based on a set of assumptions. It is important that assumptions are properly described
and consistently applied. Your focus should be as much (or more so) on the enhancement or
impairment of value over time, than the discrete metric itself, which means that applying a valuation model periodically is paramount.
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