Information Outsourcing Reply

Although the Gartner article deals with the monetisation of information assets, the sentiments may lead many businesses to outsource their entire information management responsibility.

The volume of data that most businesses can – or think they should be able to – manage is reaching an inflection point.  Businesses which grasp how analytics supports their revenue model will be able grapple with the continuing demands of information management (IM).  Businesses which cannot cope with the perceived threat of information overload may seek to outsource this responsibility.  The former will survive, the latter will fail. The research is clear:

  • IM is critical business:  derogating from one’s IM responsibility leads to an overall loss of revenue as businesses are unable to respond to market trends, develop appropriate differentiators, design suitable new products and services as well as leverage their information and knowledge for wider benefit.  Information is a firm’s core business, whether they like it or not.  Outsourcing the responsibility to understand the intricacies of a company’s business model and dependencies into the extended value net is a recipe for disaster.  Businesses should use all available software and technical expertise to do this but must do so with internal resources.
  • Outsourcing accounts for cost differentiators not key value drivers:  Firms which seek to cut costs by outsourcing their IT function do not recoup their losses.  The lessons of Ford, GM and Levi Strauss still remain.  Businesses which outsource their entire IT function continue to lose economic-value-added (EVA).  Although it is a good idea to outsource platforms and infrastructure it is rarely beneficial to outsource applications and services which are deeply intertwined with the more social aspects of a company’s business processes, i.e. if your process isn’t rigidly vanilla and perfectly understood then don’t outsource it.  Banks have well documented electronic processes which allow customers to manage their money and transactions remotely.  Even so, they manage these processes internally because it’s core business.

Businesses which purport to leverage economies of scale in order to be able to make sense of a firm’s information are not telling the whole story. It is virtually impossible to crunch structured and unstructured data to squeeze out additional value unless the vendor has also programmed the client’s value chain and key differentiator’s into their big-data algorithm.

“IM is not a software problem it is a business problem.  Regardless of the promises by vendors they will never be able to support management in their daily needs to navigate the subtleties and complexities of corporate information.”

It is highly likely that by 2016 the next fad, after Big Data, will be the monetisation of a firm’s information assets.  No doubt that in the low-end of the market there will be some level of commoditisation of information which will support more targeted marketing and the procurement of specialist advertising services.  However, businesses which outsource critical IM functions (largely through cost pressures)  in their business will turn unprofitable (if not already) as they become unable to respond to the market.

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