An information silo is a management system incapable of reciprocal operation with other, related management systems. A bank's management system, for example, is considered a silo if it cannot exchange information with other related systems within its own organization, or with the management systems of its customers, vendors, or business partners. "Information silo" is a pejorative expression that is useful for describing the absence of operational reciprocity. Derived variants are "silo thinking", "silo vision", and "silo mentality".
The expression is typically applied to management systems where the focus is inward and information communication is vertical. Critics of silos contend that managers serve as information gatekeepers, making timely coordination and communication among departments difficult to achieve, and seamless interoperability with external parties impractical. They hold that silos tend to limit productivity in practically all organizations, provide greater opportunity for security lapses and privacy breaches, and frustrate consumers who increasingly expect information to be immediately available and complete. Although much has been written about them, information silos are becoming far more recognized as the major reason why organizations are unable to take full advantage of the Internet's power to interconnect business processes.
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As of 2010[update] the phrase "silo effect", popular in the business and organizational communities, refers to a lack of communication and common goals between departments in an organization. It is the opposite of systems thinking in an organization. The silo effect gets its name from the farm storage silo; each silo is designated for one specific grain.
A lack of communication causes departmental thinking to lack ideas from other departments. A notable example of the silo effect in the real world is the beer distribution game, whose goal is to meet customer demand for cases of beer, through a multi-stage supply chain with minimal expenditure on back orders and inventory. Communication is against the rules so feelings of confusion and disappointment are common.
Another, slightly more academic, suggestion as to the term silo effect focuses on the gradual draining of the entire silo's grain from a remarkably small opening in the bottom. The homogeneous state of the entire volume of grain makes it highly susceptible to small changes as they occur further and further down. This is because gravity, although apparently "unimportant" to a fully contained silo, suddenly shows itself to be an underlying force binding every single grain—something which becomes apparent when an "anomaly" occurs at the bottom. Moreover, the nature of grain makes it an excellent example of a "poorly connected" substance, prone to cascades of extreme collapse when they occur in favor of the systems overriding unified force. In this case, gravity. If the grain were more like a soapy foam, or even a gel, such a terrible collapse would be intrinsically averted, by means of the distributed multidirectional stability of its parts.
From a technology viewpoint, silos are managed by computer systems that do not provide efficient machine communication systems to other computers. In this view, "silo technologies" limit what software developers can do, and are the reason organizations must employ middleware and web services to overcome the limitations of disparate systems. While effective for addressing specific needs, middleware and web services are considered stopgap measures because they must be applied on a case-by-case basis and cannot achieve business process interoperability among all disparate management systems worldwide.
Silo technologies restrict the capabilities of the applications which manage much of the world's structured information. Databases are the time-tested way of storing, using and safeguarding vital enterprise business procedures and data. Most of every organization's computerized information is controlled by database applications, including all the "back end" data on the web. While many applications are very capable, even the most sophisticated are built with silos in mind, all but assuring that the business procedures and data in one maker's system will be unable to interact with similar—or even identical―business procedures and data in another maker's system. The vast number of incompatible database applications in use perpetuates the existence of silos, making it impossible for run-the-business software to take full advantage of the Internet.