From MIKE2 Methodology
Activity: Return on Investment of Information Assets
Objective
The Return on Investment of Information Assets activity is used to determine the current cost of information assets, projected expenditures as part of a planned information management engagement and the return on the investment. It also brings in competitive analysis information that would be incorporated into the benefit model. This model could be applied at a enterprise level or on an individual project basis. It would be conducted in the business blueprint phase of a strategy engagement.
Information theorists have long struggled with the problem of establishing a mechanism for the valuation of the enigmatic substance of data. With the proliferation of federated stores of information and complexity, the need for an approach in this area has become even more crucial.
The Economic Value of Information is used as key input to this activity; the output from this activity feeds into the BusinessCase.
Major Deliverables
- Projected Returns on Information Assets
Tasks
Determine Current Cost of Information Assets
Objective:
This is a current state assessment on costs for information assets. Factors include technology product costs, operational running costs and costs for information analysts.
Input:
Output:
Define Planned Expenditures on Information Assets
Objective:
This task captures the expected costs on upcoming information management initiatives. This cost should involve technology, training, organisational change recommendations and transformation costs. It should also factor in the depreciation cost of information assets, the intermediate step changes that will be required along the way and decommissioning costs.
It should also take into consideration fixed costs needed to develop information assets. These are salaries of professional staff and other fixed cost incorporated in billing rates. Those can be sometimes very material and shouldn't be forgotten.
If possible, cost information should be collected for at least the last 3 years. When collecting the information it is helpful to note programmes that resulted in major expenditures, project-specific ROI and shared cost. An Information Asset Cost/Benefit Model can be used as an example of the information to be collected.
The goal should not be a detailed assessment - this should be a very high level view. Percentage estimates should be used to determine amount of money spent on IM engagement (e.g 20% of an application implementation).
Input:
Output:
- Planned Expenditures on Information Assets
Define Financial Benefits Model on Improved Information Assets
Objective:
Define the potential benefits of investment. The focus should be on quantitative factors which can then be blended with other benefits in the overall business case. The financial model should provide a NPV (Net Present Value) analysis of the solution investment options.
Input:
Output:
- Project Benefits on Information Investment
Information Assets Competitive Analysis
Objective:
Analyse what key competitors are doing in relation to managing their information assets. As much as possible, relate how the organisation's investment will provide benefit. When capturing competitor information the following should also be taken into account:
- Competitor size (number of employees)
- Competitor size (number of customers)
- Competitor market capatilisation
- Competitor market share
- Total IT spend
- Common issues facing competitors
- Different issues faced by competitors
- Historical investment
Although this approach is imprecise as competitors will be at varying levels of maturity, it is helpful in forming a case for investment.
Input:
- Current Costs of Information Assets
- Forecasted cost of Information Assets
- Project Benefits on Information Investment in money terms, current and future
Output:
- Comparison of Information Asset Cost/Benefits with Competitors
Core Supporting Assets
The Information Asset Cost/Benefit Model will be a core asset once its developed.
Yellow Flags
Areas to look out for include:
- Resistance from the organisation to recognise information as an asset.
- Lack of a high-level, current-state information architecture to be able to determine where information assets reside.
- Very poorly defined past project history regarding delivery or project financials.
Key Resource Requirements
Potential Changes to this Activity
Some potential changes to this activity in future versions could include:
- Determination whether this model should use a best practice financial modelling technique for investment of capital, such as the Net Present Value or Rate of Return. In this case some calculation would need to be made about the cost of not investing.
- Determination of what fashion the Economic Value of Information model should be extended. It should, however, be kept as an input and to more detailed financial analysis done within this activity.
- Whether specific information should be brought into the ROI assessment (or follow-on activities), such as:
- Data accuracy measures on customer data
- Latency issues on decisioning information
- Complexity issues due to federation of master data
In this case the analysis would need be done later; this analysis may make sense to have as activity in the Roadmap
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