Understanding the dynamics of information management costs

Introduction

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.

With organizing and utilizing data now seen as one of the most critical issues facing firms worldwide, 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. 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. Lastly, we review several challenges posed by our framework that future academic research can help to resolve.