Improving Data Warehouse and Business Information Quality: Methods for Reducing Costs and Increasing Profits

CHAPTER 7

Measuring Nonquality Information Costs

“All organizations are at least 50 percent waste—waste people, waste effort, waste space, and waste time.”

–ROBERT TOWNSEND

The real costs of poor-quality information are most tangible, directly affecting the bottom line in two ways. The first is in the form of direct costs as a result of “information scrap and rework.” The second is in the form of missed and lost opportunity. Missed and lost opportunity due to poor information quality, while intangible, can be estimated fairly accurately given customer attrition patterns and complaint data.

There are three reasons for measuring the costs of poor-quality information:

• To determine the real business impact of information quality problems
• To establish the business case for information quality improvement initiatives
• To provide a baseline for measuring the effectiveness of information quality improvement projects

In this chapter we describe the cost and value basis for information. They consist of the five processes of the resource life cycle, required to effectively manage and exploit the value of any resource. Four of the five processes constitute the cost basis of a resource, and the fifth process makes up the value basis. We describe how the same principles and cost and value basis apply to information and its information resource life cycle.

Next we describe the costs of information quality, including the three distinct categories of the cost of quality. We focus especially on ...