by John Mancini
Data is growing at an exponential rate and is critical to many business processes—but how do you actually put a value on it? This is a question that is becoming more important, and you only have to look at the valuation of companies to see why.
If you look at the financial valuations of big digital brands that were literally created on the back of data, such as Facebook or Twitter, there is a significant difference between the actual market value and their market valuation.
A look back at the market shows what is happening. Doug Laney, research VP, Gartner said that back in 1975, on average the tangible assets of a corporation represented 83 percent of its value. Today that number is 20 percent. This means that over 50 percent of merger and acquisition exchanges can’t be accounted for.
Take Microsoft’s acquisition of LinkedIn earlier this year. The tangible and intangible assets are not even close to the $26.2 billion the software behemoth paid for it. But how can there be such a difference?
Organizations are aware that the data they hold on customers and business prospects are essential to their success. Companies are increasingly exploiting big data to make important decisions through the findings of analytics. Information is basically transforming business strategies.
For this very reason you would think that data would be seen as an asset and assigned a value. But it isn’t coming into the calculated value of a business. Why? It seems no one can work out what it is actually worth because it doesn’t fit into the physical asset pigeon hole like office buildings or computers, for example.
There seems to be to be a total inability to properly value and measure the value of information assets within a company.
Most companies invest in big data because they understand the potential that can be mined. It is a game-changing tool in business. Yet there is a growing gap between what we report about companies and what we inherently understand about them.
When are we going to formally recognise the value of this data on balance sheets? When are we going to have official guidelines for actually assessing its value?
Infonomics Comes into Play
Enter Infonomics—a discipline that aims to put a value on information. Earlier this year, AIIM invited a number of information management leaders from North America and Europe in two Executive Summits to debate why information assets are not being managed on the balance books in the same way as physical assets.
As more companies deal in information and use analytics tools to generate revenue and create an edge over the competition, the lack of any method for valuing data seems at odds with the digital business world.
It is obvious that companies understand that data is valuable, they just have no idea how much it is worth or how to work it out.
A Standard is Paramount
It became for discussion that it is critical to have standard models to measure the value of information in this digital age. Two major challenges are hobbling the progress. How to measure the value of information you don’t actually control and understanding that it can only be measured in the context in which it is actually being used.
Laney maintains that there are three key areas that Infonomics looks to measure—the realized value of information, the probable value of information, and the potential value of information. But he concedes that there is currently a huge gap regarding data in the values in these three areas in companies.
The reality is that giving a value to information is difficult. Every organization uses data in some way, but may use it in very different ways. What it is worth to one company it may not be to another.
Will information get a line on the balance sheet any time soon? Despite the growing importance of information in business, and the fact that some businesses are almost entirely information-based, I think this is some time away. But to get ahead of the curve companies should start regarding information as an asset and look at how they can best utilize and monetize it. SW
John Mancini is the chief evangelist for AIIM.
Aug2016, Software Magazine