One side effect of the big data movement is that many companies suddenly find they possess large volumes of under-utilized data. At the same time that the cost of storing that data has been steadily decreasing, the ability to process and analyze it in real time has been improving.
Meanwhile, data-driven marketing campaigns that create relevant customer experiences are booming. Several studies show that consumers are more likely to buy when offers are targeted directly to them. For example, a study from McKinsey found that 35% of what consumers purchase on Amazon and 75% of what they watch on Netflix come from “product recommendations based on algorithms focused on transaction data and digital media trends.”
This is creating a huge appetite for even more data. As a result, some CIOs are being pressured to monetize their data. In other words, while the large amount of data a company is sitting on may not be of significant value to the company that possesses it, it may be worth a lot to others. Selling this data could mean additional revenues and growth. According to a Gartner Research study, 30% of businesses will begin directly or indirectly monetizing their information assets through bartering or direct sales by 2016.
Many CIOs are therefore faced with the question, should they monetize their data?
Points to consider
To determine if selling data makes sense, CIOs should first ask if that is the business they truly want to be involved with. Data monetization for external use “is not the same type of animal as value generation in internal ways,” Barbara Wixom, principal research scientist at the Center for Information Systems Research, said during the recent MIT Sloan CIO Symposium.
CIOs who delve into external data monetization are going after market share, and that means new challenges that can significantly detract from core business goals.
Also, selling data may represent a liability from a legal and security perspective, Jennifer L. Rathburn, a partner with law firm Quarles & Brady and a specialist in data management, data breach and privacy and cybersecurity issues, said in her study on the topic.
"You have to have a good business justification for collecting [data] because it can be a liability," she said. “Statutory penalties for violating privacy laws can be severe and include hefty fines and even criminal penalties.”
Inside advantages
An alternative would be to monetize data for internal purposes. An IT department can help its business find value in data to solve business problems, make certain processes run more efficiently, or improve business intelligence by applying data analytics.
Value generation though internal data monetization might be just as valuable to the organization as external data monetization — a point CIOs under pressure to monetize data externally may want to stress to the larger organization.