Chapter 1. Understanding the Information Economy

Managing information has become as important to the enterprise as managing financial information has been to the accounting functions of a business. Information now pervades every aspect of an organization, including reporting, marketing, product development, and resource allocation. In the last twenty years, business reports to management and investors have become much more dependent on information derived from nonfinancial sources than ever before.

In fact, as the economy increasingly depends on information, the old assumptions about what is important have changed. The value that business saw in scale due to shared functions and infrastructure have been turned on their head by business process outsourcing (BPO), which is the outsourcing of a business function that might previously have been done within the organization. Examples include the processing of invoices, payroll, or even customer contact through call centers.

BPO is only possible because of advances in the storage, communication, and description of complex information at a cost that is much lower than imaginable even twenty years ago. At the same time, the value that business might previously have seen in owning infrastructure (such as manufacturing plants) has been overtaken by the value of the knowledge of the manufacturing process.

Everywhere we look, we see examples of how the management and exchange of intangible information has become more important than the trade in ...

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