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Capitalising on data

As businesses across sectors look to monetise their proprietary data, Lyceum Capital partner Dan Adler explains how the best data providers operate.

Generating data to maximise a business’s performance, including profits, sales effectiveness and internal operations, is a long-standing theme among business owners. However, some businesses are going a step further and monetising the data they collect to reposition themselves as information providers – irrespective of the industry in which they operate or the core customers they serve.

Clearly, there is money to be made in data, with the global business information market worth £99 billion and growing at 3.8 percent, according to PwC. Furthermore, recent valuations for data businesses are skyrocketing. Where a consultancy business is typically valued at between five to eight times earnings, top data companies can achieve a valuation of up to 20 times earnings.

However, while the opportunities for data providers are huge, so are the challenges. Not every business has the capacity to become a successful, high value data company. So, what does it take?

Segregating the data

Would-be data providers need to think carefully about the kinds of data they want to make available. This might mean filtering the vast amount of information held in any data set to ensure it is valuable to the customer, or adding to it.

Air transport specialists Airclaims’ decision to hive off its proprietary data into a separate analytics and advisory business, Ascend, is a powerful example of leveraging internal information to create value. The separate unit with its online aviation database AIR was later sold to FlightGlobal, a leading source of aviation industry news, data and insight. The business now sells data on a number of specific industry verticals from aircraft and engine valuations, aircraft accident and loss figures to environmental data, to customers that range from manufacturers to regulators.

Other data providers, such as IIL, which started as a small business providing data to the insurance industry, have expanded their initial product offering by rolling in externally generated data sets. The data hub serves a blue-chip client base in insurance, credit, online commerce and public services, delivering up to 100 million transactions a day to enable users to make informed business decisions. The business has grown from a team of three people to more than 80 employees. It was acquired by LexisNexis Risk Solutions in July last year.

Bedding in

To be successful, businesses need a clear view on how each market or sector vertical currently uses data and how this could be expanded, including what education clients need and the technology required to facilitate product delivery. It is vital for data providers to understand their customers’ workflow and how their data service fits into it so they can ensure that their product is tightly integrated and indispensable.

To do this it is no longer enough to provide simple data files. By deploying software that interfaces with clients’ IT, providers can not only supply invaluable business critical data, but embed their product to the extent it is hard to remove. In turn, deepening client relationships and stronger recurring revenue drive up the value of the provider over the longer term.

Specialist energy and utility data provider UD Group is a great example of a company that has deployed technology effectively to enhance the customer experience and the value of its product. UDG allows energy companies to access data such as meter readings and live price comparisons through an application programme interface that integrates with customers’ existing CRM systems. One clear benefit of the API is the speed at which data is delivered; a feature that is prized by any customer.

Securing the service

Businesses on a journey to become a data provider need to consider the security of their product, including how that is achieved, who has access to the data and for how long.

Not every customer will need to access the same kind of data. Sensitive data can be separated from information that is not confidential or exclusive to particular users and different access controls applied. Implementing different access levels makes it easier to monitor which client accesses what and when, and to enforce more stringent restrictions in the event of suspicious activity.

The best data providers will also deliver and sell their products through an ‘as-a-service’ model. Not only does accessing data on demand rather than storing it in a self-contained repository allow for greater flexibility and reduced cost to both the provider and the customer, data-as-a-service (DaaS) provides an innovative platform on which to collaborate, develop service lines and share data, while allowing customers to access the data they need anytime, anywhere.

Getting ahead of the market

With the growing use of connected devices and the internet of everything (IoE), more data is being produced than ever before. Determining what is useful to customers and what is not will become a crucial task for any data provider looking to grow their business.

With that in mind, successful data companies need to first and foremost understand their target market and the value of their specific data offering. They must market the right kind of data to the right customer, whether it be proprietary or blended with information supplied by a third-party. And data must be secure. Businesses operating a DaaS model lead the charge for greater growth and profitability potential, while the sophistication of a provider’s technology platform is a differentiator in this highly competitive market place.

Implementing all of these factors will set apart one data provider from another and ultimately see a data company’s valuation skyrocket.

This article was first published in IT Pro Portal