Security

What Is Asymmetric Information and How Does It Impact Your IT?

Experts say teams working with incomplete information are more susceptible to poor decision-making and workflow inefficiencies. Here’s why.

Nathan Eddy

Nathan Eddy works as an independent filmmaker and journalist based in Berlin, specializing in architecture, business technology and healthcare IT. He is a graduate of Northwestern University’s Medill School of Journalism.

The term “information asymmetry” is rooted in economic theory. It describes a scenario in which one party in a transaction has more or better information than the other, leading to imbalances in market predictions, inefficient operations and skewed decisions.

When key stakeholders such as IT teams, security professionals, or management lack equal access to organizational visibility, they may struggle to optimize infrastructure, manage risks or plan future investments effectively.

This imbalance can have profound implications for analytics and generative artificial intelligence (AI) strategies and can negatively impact critical IT domains, including service-level agreements (SLAs), cloud cost management, IT purchasing and security.

What Is Asymmetric Information? Experts Explain

Forrester principal analyst Christopher Gilchrist describes information asymmetry as a “fundamental issue” that can significantly impact the IT landscape. “This imbalance often occurs between vendors and customers, IT teams and business leaders, or even within internal departments,” he says.

When one side lacks a full understanding of the technical, financial and operational details of a system or service, it can lead to poor decision-making and inaccurate assessments.

“For example, IT teams might overpay for services or adopt solutions that fail to meet the organization’s needs because they lack critical insights,” Gilchrist says.

Stephen Elliot, group vice president for infrastructure and operations and cloud operations at IDC, notes that data is critical to addressing these gaps.

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“High levels of business returns will be dictated by the types and amount of customer data used in models that produce consistent and accurate outcomes,” he says.

Organizations must tap into their unique data lakes and apply customer insights, models and automation to drive competitive advantages.

By aligning technology investments with business processes, IT leaders can bridge these information gaps and ensure better collaboration between technology teams and business units.

Ultimately, by recognizing and addressing information asymmetries, IT leaders can improve vendor negotiations and create analytics strategies that deliver meaningful results.

“Applying customer data effectively is key,” Elliot says. “It’s how organizations will unlock new advantages and reduce risks across the board.”

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How Does Asymmetric Information Impact IT Environments?

According to Elliot, asymmetric information can impact SLAs by creating misaligned expectations and disputes over metrics, as one party may lack the transparency or tools to verify whether the agreed-upon service levels are being met.

“Each organization must build models they trust and use clean data to build and refresh those models,” he says.

Addressing information asymmetry is critical in ensuring fairness, efficiency and trust in economic and organizational relationships.

To bridge the gap between parties with unequal access to information, IT leaders should work to create transparency, align incentives and minimize risk. According to Gilchrist, one-way organizations can prioritize transparency is to demand clarity from their vendors. Another is to partner with third-party experts who can identify these issues early on.

“Whether through robust training programs, third-party audits, or real-time compliance tools, organizations can bridge these information gaps and make more informed, strategic decisions in an increasingly complex IT environment,” he says.

Amid today’s growing cyberthreats, it is critical for security leaders to thoroughly understand prospective solutions while prioritizing solutions that offer comprehensive protection, visibility and scalability.”

Siroui Mushegian Chief Information Officer, Barracuda

What Is the Impact of Asymmetric Information on Cloud Cost Management?

In cloud cost management, information asymmetry is often tied to the complexity of pricing models and technical details.

Elliot says data quality and having an executive team that trusts the financial models/data are critically important to accurately understand costs.

“Inaccurate data will drive poor cost-based decisions and provide bad cost inputs for workload placement decisions,” he said.

Cloud providers have a deep understanding of their pricing structures, Gilchrist notes, including hidden fees and cost-saving opportunities such as reserved instances or spot pricing, while customers often lack visibility into these details. “This can lead to organizations overspending on underutilized resources or missing chances to optimize workloads and reduce costs,” Elliot says.

In fact, cloud vendors may downplay the costs and challenges associated with migrating away from their platforms, creating a situation of vendor lock-in that can hurt their customers.

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How Does Asymmetric Information Impact Tech Purchasing?

Barracuda CIO Siroui Mushegian says that information asymmetry can critically impact tech purchasing decisions, particularly in cybersecurity. “Buying is should always be a two-way street with vendors and customers,” she says. “Success is often jointly defined.”

Vendors may withhold key information such as hidden costs or product limitations, or overstate a product’s abilities, resulting in misaligned expectations or suboptimal purchasing decisions.

“Amid today’s growing cyberthreats, it is critical for security leaders to thoroughly understand prospective solutions while prioritizing solutions that offer comprehensive protection, visibility and scalability,” Mushegian says.

Organizations should fully understand how their sensitive information is collected, stored and processed to train and improve both internal and external AI systems, prioritizing a clear flow of information to ensure all data is protected.

“Without full visibility into how data is processed and secured, whether by a cloud provider or a third-party AI solution, organizations risk breaching compliance or facing legal penalties,” she adds.

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