Opinion

The Value of Data

A new way of thinking about data, its value and the risk associated with it

By Bob Bragdon

April 01, 2008 —

I am fortunate in my position to have the opportunity to speak with many of our market's thought leaders. I've recently had some conversations about the value of data with a number of such folks, including Rena Mears from Deloitte. That discussion has me thinking in a whole new way about data, its value and the risk associated with it.

Assigning monetary value to data is a concept that few businesses seem to be embracing, although, even from a cursory examination, it would seem to make a great deal of sense to do. We treat everything else in our organizations as assets with measurable financial value: inventory, people, property, etc. But when was the last time you sat down and calculated a dollar value for your customer database? My guess is that it has never been done.

So what would go into such a calculation? You should certainly consider past, current and future earnings per record in the database. Most organizations can tell you, with a fair degree of certainty, how much revenue they can expect an account to spend with them in the future based on past performance. Over the years, certain industries have been very successful at this type of forecasting based on a variety of sales and performance metrics that they track. Those metrics are usually maintained by the finance and/or sales departments.

Now that you have assigned a monetary value to your data, it's time to take a look at risk. The loss of any data that you maintain, particularly if that data contains information subject to regulatory control (Social Security numbers, etc.), carries a certain amount of risk if that data were to be lost, damaged or stolen. It's the same as if you had inventory lost, damaged or stolen. As you accumulate more of that data, the risk of loss goes up as well.

While businesses have aggregated data over the years, with little regard to the quality or value of that data, they have often failed to ask whether they are getting any kind of an ROI from it. As a critical component in determining the value of data, ROI would be a significant contributor to an evaluation of relative risk. This analysis allows you to answer questions of risk versus return: If you're not getting a good ROI on your data but it presents you with significant risk, should you hold on to it? If the data is valuable and has a good ROI but the risk is too high, should you get rid of it? At the end of the day, these answers will be unique to your specific organization and its willingness to accept--or its desire to avoid--risk.