A case for efficient information systems.

In the last 20 years I’ve seen computer technology advance from a single processor that processes 8 million instructions per second to one that processes over 60 billion instructions per second today. In that same period the clock speed of a processor has increased from 25 MHz to over 4 GHz all while using the same silicon that was thought to be a barrier to this kind of performance. Storage has gone from 3 Megabytes to hundreds of Gigabytes on a single device and it is common for servers and storage networks to have multiple storage devices that hold Terabytes of data.

In the 1980’s only the largest companies used T1 and T3 lines that moved 1.5 Megabits/s of data and 4.5 Megabits/s of data respectively. Today, T1’s and T3’s are common in small businesses and larger companies are using technologies that allow 155 Megabits/s over wide area networks. Researchers at Carnegie Mellon University are working on a project to bring 100 Megabits/s bandwidth for internet connections to every home in America. Currently, the average bandwidth is less than 2 Megabits/s. Twenty years ago, 10 Megabits/s ethernet was common for local networks in the office and school. Today, companies have 2.5 Gigabits/s switched networks available that allow more than 100 Megabits/s transfer rates to every user on the network.

In 2001 the average Oracle data warehouse was 30 Terabytes and in 2005 it was over 100 Terabytes. That was more than 300 percent growth in just 4 years. Image how much data companies are storing in their databases today.

What all this means is that businesses and business people collect, process, transmit and store more data today than they ever have before. Exponentially more data. But are businesses making use of that data to create value? Is that data being turned into useful information and put into the hands of the right people at the right time to add to the company’s bottom line? Are we using the data and systems that we have now to their full potential now? The answer is no. I believe that, in many companies, the art of using technology and data effectively to run a more profitable and efficient business has been steadily replaced by the business of just having technology and data whether it is used or not.

It is easy to see how this would happen. First, companies are expected to have lots and lots of nice computer equipment full of lots and lots of data. Customers expect it and it is a selling point. Second, our successful economy has created a situation where managers are too busy dealing with growth and opportunities to make efficient use of what they have. In many places there is just not enough time and not enough pressure to create efficiency. However, that will change and I believe it is beginning to change in the economy overall right now. The correction in the stock market that brought the Dow back below 12,000 and the mortgage crisis that brought real estate prices down are just two indicators of this change.

Another consideration that every public company is currently dealing with is regulation. Not only are companies expected to keep tighter control over their data but they will be changing how they are using it in financial reporting. Privacy issues and the Sarbanes-Oxley Act are just two forces that are driving this change. Markets that are becoming increasingly global are causing pressure to create and agree upon International Accounting Standards that will put even greater pressure on the efficiency and effectiveness of information systems.
Managers are going to have to be careful to not miss the cues that tell them when they need to stop growing and start becoming lean and mean with what they have.


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