In the old days IT was about saving money, while Big Data is about making money. If Big Data is about making money, it is about creating value and value should be placed on the balance sheet as an asset.
A recent study by SAS showed that around 20% of the large UK companies are already assigning financial value to their data on the balance sheet of the company, so more companies are beginning to understand and to see the value of data. So how should organisations proceed with Big Data and should they allocate it to the balance sheet?
Lets go back to school first. A balance sheet shows the financial status of an enterprise at a given point in time: its assets and its liabilities. Assets can be tangible (machines, hardware etc.) or intangible (trademarks, copyrights, algorithms, etc.). Liabilities are all legal debts or obligations that arise during the course of business operations, such as loans and accounts payable.
So, intangible assets can include data as well. In fact, AT&T placed data such as customer lists and relationships at its balance sheet in 2011 for $ 2.7 billion. If such data can be included, why not included the derived value of data, Big Data, on the balance sheet as an asset?
On the other hand, data can also become a liability if it is poorly managed or secured. A good example of that is the case of a Dutch data security firm Diginotar who went bankrupt because their data was not secured correctly and as such they were hacked. This is of course an extreme example, but it shows that Big Data security is a major importance and that it can be a liability as well. More on this topic in a later blog on this website.
Lets be positive and assume Big Data is an asset for a company. In fact, often people say information is our greatest asset. If thats true, it should appear on the financial balance sheet. Actually, David Rajan, director of technology for Oracle, found out that 77 per cent of CIOs thought data should appear on the balance sheet as a key metric to define the value of a business.
If thats the cause, how do you value Big Data within an organisation? Determining the cost of Big Data is a least a lot easier: simply add up how much it costs to create, update, store, retrieve, archive and dispose of data. In a recent blog post we discussed if Big Data means Big ROI. Perhaps ROI says only one thing as it assumes that an investment is necessary when starting to use Big Data. Perhaps we should start using the term Return on Data as a metric to define the value of Big Data within an organisation? This could help to determine the value of it: better usage of data could lead to more knowledge about your customer, which could lead to better products delivered in shorter time-span which could lead to an increase in customer lifetime value. The difference between a new predicted CLV and the current CLV could be the value of Big Data.
Formally putting (big) data on a companys balance sheet is a big decision that should be well-founded. An advantage of putting Big Data on the balance sheet is that it for sure would drive better control and governance of that data. Putting it on the balance sheet would therefore make people aware of the presence of data within an organisation and the value of it. This could lead to better usage of it and could spur acceptance of Big Data as a strategy within organisations. So, it is not yet completely closed how to put Big Data on the balance sheet and perhaps it probably is up to CIOs to take the lead in this one. What do you think, please share your thoughts with us?
