MAKING SENSE OF IT BUSINESS MANAGEMENT contributed articles May 2010 | vol. 53 | no. 5 | communications of the acm 121 doi: 10.1145/1735223.1735253 by Paul P. Tallon Over the past decade, the mountains of data accumulating within firms – expanding at an annual rate of 30-50% and fueled in part by recent legislation such as SEC Rule 17a-4 mandating the retention of electronic communications (for example, email and instant messaging) in financial services firms for periods of up to three years – has forced information technology (IT) executives to ask how should this data deluge be managed. Intel, whose data warehouse is currently estimated at over 30 petabytes has increased its data storage by an average of 35% annually with the expectation that, if current trends continue, its data center could expand to 165 petabytes by 2014. Yet even as data volumes climb, causing data centers to double in size every other year, an innovation-led drop in annual per-gigabyte storage costs of between 35- 45% (see Figure 1) has failed to halt the rise in storage spending.2,8 With organizing and utilizing data now seen as one of the most critical issues facing firms worldwide,3 IT executives note that non-discretionary IT spending – 25% of which covers information management costs and storage infrastructure, in particular – has now reached a point where strategic IT initiatives are at risk.2 Hence, CIOs have a pressing need to understand the dynamics of information management costs and their ability to control these costs through carefully chosen policies governing data collection and retention. Knowing how these costs behave, CIOs can continue to support the data needs of their firms without limiting their IT goals. To begin this process, we examine a tiered information framework that, by considering the value of information, allows CIOs to comprehend the interplay of market forces that shape information costs.7,12 Lastly, we review several challenges posed by our framework that future academic research can help to resolve. Information Management Costs Of the six cost categories seen in Table 1, information management costs are primarily shaped by two opposing forces – namely, better, faster, and cheaper technology which exerts downward pressure on costs, coupled with a tendency among firms to collect data on every facet of their business which leads to increased demand for storage capacity and an associated increase in costs. Since firms are unlikely to rip and replace their storage infrastructure each time a new technology innovation enters the marketplace, the dominant force behind the sudden rise in information management costs is the nearexponential growth in the volume of data that is being collected and held by firms. The problem is not simply the cost of storage infrastructure (disk arrays, device management software) but the labor and overhead costs associated with backup, recovery, and storage administration. The reality today is that the collection and retention of Understanding the Dynamics of Information Management Costs 122 communications of the acm | May 2010 | vol. 53 | no. 5 contributed articles Dynamic Information Value A further complicating factor in firms’ efforts to manage information costs is the fact that not all data are created equal. For example, while a financial services firm could easily survive without access to its employee payroll data for 24 hours, the loss of key customer account data for any length of time could prove financially catastrophic. In such circumstances, an IT manager is less likely to favor a simple cost-minimization approach to ongoing data management, fearing that the impact of delayed access or systems failure could outweigh any promised cost savings from pursuing a low-cost infrastructure. Instead, service level paramdata is expanding at a faster rate than the ability of new technology innovation to neutralize or compensate for any demand-driven increase in storage costs. Firms are literally choking on their own data. Even as firms struggle to accommodate new data, there remains the question of how to deal with existing data that are stored on legacy systems. In an analogous sense, just as car drivers are reluctant to replace their cars each year simply because of new airbag or safety technology, better fuel economy, or a nicer interior, there is nevertheless a point at which the high cost of maintaining a long-since depreciated car exceeds the capital depreciation costs on a new car. Consequently, IT managers need to recognize that information management costs arise not merely because of new data but also because of existing data and that in the latter case especially, there may come a time when migrating this data to new, better, faster and cheaper storage infrastructure becomes an increasingly attractive proposition. Knowing this, vendors have started to price new storage hardware so as to match the maintenance costs of older hardware. Firms may mistakenly see this as having a neutralizing effect on overall storage spending but this is not the case. eters such as reliability, availability, security, redundancy, response times, maintainability and scalability are more likely to influence infrastructure utilization decisions, even if this higher service level should cause an increase in information management costs. If IT managers are required to maintain high service levels for data that must be readily accessible, the fear that “you get what you pay for” will force them to migrate data to newer and more reliable storage infrastructure sooner rather than later, even if the capital costs of the existing storage infrastructure are not yet fully depreciated.

Is this the question you were looking for? If so, place your order here to get started!