Most people have heard the phrase people are our most valuable resource. But is this really true? And assuming that it is do most businesses act on this truth? Arguably, there are three general categories of resources that managers control: capital resources (to include real property assets), human resources and information resources.
Most companies will insist that their human resource is their most important asset. For the most part, however, when financial difficulties arise, the first thing companies do is lay off their people. For years, revenue has been the yardstick used to measure a company's success or failure.
Traditionally, capital resources have been at the top of the resource chain given that human resources and information resources are viewed in terms of expenses, whereas capital is measured as revenue generation or cost avoidance.
Second in the chain have traditionally been the company's human resources. Traditionally, companies have been intent on safeguarding their human resources (I would argue for the knowledge that they retain), and with the advent of consulting companies and placement firms, there is a market for recruiting human resources from one company for placement in another.
That leaves information as a company's perceived least-important strategic resource. This is reflected in the management of information resources, which is the responsibility of the corporate CIO, who has, for no particular reason, not always been considered an equal to the COO. In fact, much of the COO's success is dependent on the CIO's ability to process operational information into business intelligence! In other words, the manager of one of the three critical resources is usually not the functional equal of other C level executives. Consequently, the information resource that determines the success of the other two resources is undervalued and underleveraged.
Lets take a closer look at the interplay among these three categories. We have all heard the expression time is money. How many of us have stopped to consider that in the realm of resource management, information is money? Literally!
For many, the information resource is literally, a financial resource. How many people receive a paycheck anymore? In 2008, according to the U.S. Treasury Department, 66 percent of Americans used direct deposit where, in essence, information representing money is transferred from one entity such as an employer to another entity such as a bank, credit union or savings and loan.
In the information processing industry, corporate revenue depends on transaction processing or, in other words, information processing. In the credit card industry for example, the card company's revenue comes from licensing fees and transaction processing. Its revenue is based on the numbers of transactions processed in addition to the amount of the transactions. It is easy to see that information becomes the cash cow in this case.
When regarding information as a component of a business intelligence strategy, there is a hierarchy to consider. It begins with data, which is nothing more than raw figures that by themselves are meaningless. However, when you put that data into context by combining it with other data, defining and structuring it with standards and business rules, you create information that becomes a corporate resource. Further, when you include the human element, the knowledge of the individuals who gather, input and define the data, compile the information, establish the business rules for data usage, create data standards, and relate and store the information in data warehouses and data marts, you create the knowledge needed for management decision support at the strategic level. Then, at the end of this whole long chain, this knowledge is used to create reports, process queries and build intelligence that senior management taps into as the basis for making strategic decisions.
Now, considering the numbers and types of information systems jobs currently outsourced offshore, there is the potential problem of knowledge loss and, consequently, capital loss. In some cases, information can be a major source of revenue generation, making it nearly as important as the capital resource on the corporate resource hierarchy.
Thus, it becomes a chicken and egg sort of argument as to which comes first, the capital or the resource that generates the capital? However, when looking at the human resource aspect, personal knowledge becomes less tangible and quantifiable. For example, for every information systems professional position outsourced offshore, there is a tangible cost savings. So that would imply that there is a direct correlation between the human resource and the capital resource.
The very resources that corporations are outsourcing are, in many cases, those same human resources who are processing information and are considered knowledge workers because of their expertise in gathering and processing the data, interpreting the data according to the standards and business rules, compiling the information and collecting the information for further quantification with BI tools. In other words, corporations are outsourcing the corporate knowledge base. In this case, management's control of and planning for knowledge turnover will be affected, and the knowledge itself (not quantifiable and usually unstructured) may be lost. Further, the effects of this loss will impact BI and strategic planning.
Up to this point, corporate strategy has been based largely around capital resources and consequently the information resource, because it is a primary revenue generator. However, in an effort to swell the corporate bottom line by reducing human resource costs through offshore outsourcing, corporations have inadvertently undermined their knowledge resource and, in the long term, their business intelligence.
Ultimately, it is difficult to prioritize these three corporate resources when there is such a close inter-relationship between them, from which we might conclude that one is no more important than the others. So it would be wise for strategic planners to consider the knowledge management and business intelligence implications prior to outsourcing their companys knowledge worker functions. Though a corporation may see a bottom-line savings of capital through offshore outsourcing in the near term, such action will lead to a gradual loss of knowledge that will undercut the corporate information resource and its ability to generate capital in the long run.
Dr. Michael Abeln is currently a data architect at a major financial institution and an adjunct Full Professor in Information Management and Strategic Management at Webster University. He has a BS in Management, an MS in Business Administration, an MA in Information Management and a Doctorate in Management.
This story originally appeared on Information Management.
Register or login for access to this item and much more
All Health Data Management content is archived after seven days.
Community members receive:
- All recent and archived articles
- Conference offers and updates
- A full menu of enewsletter options
- Web seminars, white papers, ebooks
Already have an account? Log In
Don't have an account? Register for Free Unlimited Access