Traditionally, enterprises were valued based on their balance sheets and on the analysis of their future revenue potential. Silicon Valley businesses defy that system. Modern enterprises derive their value from the number of users they have, the personal data – size, type, and quality of data – they collect from their users, and the usefulness of such data. Big data and data analytics have become potent tools to create enterprise-wide value.
Across industries, companies are embracing the revolutionary power of data. Analytics and Big data have found top positions in the corporate strategy of organizations. A data-driven company can forge ahead by creating products and designing services to cater exactly what the customers want. They become drivers of innovation and change in the industry. According to a report by International Data Corporation global revenues for big data and analytics will grow over 50% between 2016 and 2020. Businesses are investing in data and for good reason.
Data and Analytics capabilities are integral to the survival and sustainability strategies of businesses worldwide. In such data-centric enterprises, IT budgeting has undergone a tremendous transformation and quite understandably so.
According to a recent Gartner Inc. report, the expenditure on information security products is expected to reach $93 billion in 2018. Many consider this to be a conservative estimate, given the meteoric rise in the number of breaches witnessed in the recent years like the Equifax breach, WannaCry, and others.
Data protection is no longer an option or afterthought for the companies to consider.
With EU getting ready to implement its aggressive General Data Protection Regulation (GDPR), a stricter version of its 1995 data privacy directive, businesses must increase their focus and spending on cybersecurity. The regulation that will come into effect in May this year will levy heavy fines on ‘data collectors’ and ‘data processors’ if the data they store or process is compromised. If fined, companies are looking at fines of up to €20 million, or 4% of the global annual revenue.
These laws apply to all companies within or outside EU that deal with the data of EU nationals. This adds to the reach of the law. This means that a good number of businesses headquartered in the US will come under the law’s ambit. And that’s just a start. Cybersecurity is a major issue and the regulatory climate will only get stricter from here. Budgeting for and investing in security solutions is a matter of survival for data-centric companies.
Talent Acquisition and Development
Survey results published in ‘The Data-Centric Organization 2018’ showed that only 1.3% of its respondents were “were ‘extremely confident’ their organizations have the right expertise, skills, and experience necessary to obtain the most value from their data”. A talent gap exists and IT budgets of data-centric organizations should account for it.
Businesses are realizing that a major skill gap exists in the field of big data and analytics. 48% of the 900 senior business decision-makers in 9 major countries (including the US) want better data and analytics training to bridge the skill gap that exists in their organizations. For a data-centric organization, it becomes imperative to invest in relevant training and bring highly skilled talent on board. The right talent will be able to make sense out of the colossal amounts of incoming data and turn it into strategic business insights. It will have a direct impact on the balance sheet of the company.
Software and Hardware Purchases
A report based on the 2018 CIO Agenda Survey, which interviewed 3160 respondents, says that digital transformation is the top most priority for the 461 CIOs in the government sector across 98 countries. These CIOs are focused on creating a data-driven culture and bring changes to their organization. These changes have to be accompanied by investment in hardware and software solutions. Right organizational structures and tools have to be in place to fuel a successful digital transformation.
There should be investments into the right hardware, software, and data collection methods that can improve the quality of the data collected. An EY survey across 270 senior executives noted 50% of the respondents citing poor data quality as the main reason for the lack of trust in the value of data.
Remember! Garbage in, garbage out. Without an improvement
in the quality of data, it is futile to expect a high ROI.
Companies should bear in mind that the right tools alone do not guarantee success. There should be a problem statement in place and a clarity of thought as to what the technology teams must achieve. Harvard Business Review cites a rather interesting example of a large life sciences company that invested big time into advanced analytical tools. The IT teams successfully acquired the tools that they did not understand. Fortunately, the skill gap was recognized and a catastrophe was terminated.
The lesson here is ‘balance’. Invest in bleeding-edge tools. It will definitely create a competitive advantage for the business. However, ensure that such tools are critical to the business strategy and that it is an investment that will bear returns.
In 2015, Microsoft CEO, Satya Nadella said, “Every business will be a software business”.
With IT departments leading the enterprise innovation and development of competitive advantage, Nadella’s words are finally turning into a reality. A robust IT budgeting in data-centric organizations is the key to creating a better and improved technology solutions for tomorrow. Companies require strong leadership, calculated investments, and the vision to understand the value of their data to stay at the top of their game.