Data Effectiveness: Could Your Business Use an Extra $2 Billion?

Better management and analysis of your data can significantly add to the bottom line, by as much as $2 billion — at least if you’re a Fortune 1000 company, according to a new survey by Sybase and McCombs School of Business at the University of Texas.

The report looked at the financial impact of improving the effectiveness of using data.  The report considered five areas of data improvement — quality, usability, intelligence, remote accessibility and sales mobility.

How did they come up with that $2 billion number?  They looked at a select set of 150 companies in the Fortune 100 from retail, consulting services, financial services, telecommunications and energy/gas services industries.  Those companies had on average 36,000 employees with average sales of $388,000 per employee.  The study found that increasing data usability by 10 percent would result in a sales increase of 14.4 percent.  That translates to an additional $55,900 per employee.  Overall resulting in an additional $2 billion in sales.

Anitesh Barua, professor at the University of Texas at Austin said that “This is the first study that quantifies the relationship between incremental improvements in data and key performance metrics of businesses today. Previous studies tell us neither the magnitude of the effect on performance nor what it takes to improve the attributes of data. We are encouraged by our findings and expect the business community to take notice.”

The report found that data effectiveness improvements can also affect a measure called the Return on Equity (ROE) which is defined as the ratio (net income/shareholder equity).  This is an indicator of a business’ ability to grow.  Again, improving data effectiveness by 10 percent resulted in a 16 percent increase in the ROE for the company.  Two data factors in particular which affect this are data quality and sales mobility.

Data also has an effect on the measure of Return on Assets (ROA).  This measure looks at how a company generates income through the effective use of its resources.  Two data qualities that especially  factor into this measure are intelligence and remote accessibility.  Improving data effectiveness in these areas by 10 percent would result in increasing ROA by .7 percent.

Dr. Raj Nathan, Senior Vice President and CMO at Sybase, said that  “As the volume of data continues to grow, organizations of all sizes must confront the challenges around managing, analyzing and mobilizing data in new ways. This study deductively shows that even the most pragmatic improvements in data efficiency can lead to measurable financial gain.”