Blogger: Lyn Robison
We’ve had several clients ask us for help in defining the return-on-investment for data quality and/or data management for the benefit of their CIO. I struggle with that ROI calculation because it is so basic and obvious to me that I almost can’t articulate the value proposition. It is as though I am being asked, “Can you give me the ROI on doing regular oil changes on our company-owned vehicles?” I am afraid that I would find it difficult to come up with an ROI calculation for that one too.
The value of any information system can be determined by measuring the value of the information that that system provides to the business. If you neglect to do data quality and data management on any information system, the information within that system will eventually deteriorate into a worthless, indistinguishable blob of goo. If the information within an information system becomes worthless, then the information system itself becomes worthless too. Any information system that provides useless information is useless. Like an airplane that can’t fly, it is unfit for its intended purpose.
What is the ROI on not letting a corporation’s valuable assets, such as its information systems, deteriorate? I guess you show that if you neglect any valuable asset, its value will deteriorate to nothing. So, the inputs are the value of the asset today (Vi), and the value of the asset after one year of neglect (Vf). Then to calculate the ROI, (or in this case the yield, effective interest rate, effective annual rate, or annual percentage yield) you take (Vf – Vi)/Vi. As you can see, if Vf is higher than Vi, you will get a positive yield. If Vf is less than Vi (if the asset’s value is deteriorating) you will get a negative yield.
To do this calculation, you have to be able to quantify Vf and Vi. Coming up with precise, defensible numbers for Vf and Vi can be difficult. And as a result, many CIOs have thought (consciously or unconsciously), “Hmmm, there is no ROI for data quality or data management.” As a result, those CIOs have not prioritized data quality or data management work. Instead, they are passively letting the value of their existing information systems deteriorate to nothing. That approach does not make a lot of sense to me.
This is where information quality metrics come in handy. If an enterprise were to measure the quality (a.k.a. "the usefulness to the business") of the information coming from their information systems over a one-year period, they could calculate the yield (positive or negative) in the value of their information systems. If the IT organization can keep the yield positive, I guarantee that the business will be pleased with the IT organization’s efforts. I also guarantee that if the yield is negative (whether it is actually measured or not), the business will not be pleased with their IT people and will look for any opportunity to outsource or replace them.