Fortune 1000 Firms Could Increase Revenue by Billions with Effective Data: Study

Wednesday Sep 1st 2010 by Thor Olavsrud
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Fortune 1000 Firms Could Increase Revenue by Billions with Effective Data: Study

The median Fortune 1000 company could increase its revenue by $2.01 billion a year just by marginally improving the usability of the data already at its disposal, according to a study released by Sybase.

The study — "Measuring the Business Impacts of Effective Data" — was commissioned by Sybase and conducted by researchers from the McCombs School of Business at the University of Texas, in conjunction with the Indian School of Business. It collected data from 150 Fortune 1000 across a wide range of industries. Sybase was acquired by business intelligence and CRM giant SAP (NYSE: SAP) in July.

According to its findings, even the most incremental investments in improving the versatility of data has a dramatic effect on employee productivity, return on equity, return on invested capital and return on assets.

"The results of this study — particularly in today’s highly challenging and competitive business environment — underscores the importance of making data effectiveness a business priority," Sybase Chief Marketing Officer Raj Nathan said in a statement. "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."

To assess the value that businesses were squeezing out of their data, the researchers looked at a number of attributes. For instance, they examined data quality: the accuracy, scope, timeliness and recency of businesses' information. They also considered data usability — the extent to which data is concisely presented; the ease with which data can be manipulated or processed; and the extent to which data is consistent across multiple sources.

According to the study, a 10 percent increase in data usability increases sales per employee — the measure of employee productivity — by 14.4 percent. Sybase said that applied to the median sales per employee in the survey ($388,000), the median organization could increase sales per employee by $55,900 annually ($2.01 billion in total revenue) by improving data usability.

Another factor taken into account by the study's researchers is intelligence — the amount of key business learning that can be gleaned from data, like trends on data items of interest (e.g., price); demand patterns (e.g., variation by the day of the week); recommendations for better decision or actions; and profile matching. Ostensibly, enterprises have also begun figuring out the importance of business intelligence, which promises to help them better avail themselves to the information they can derive from and make decisions based on real-time analysis. Their acknowledged need for BI tools has, not surprisingly, given rise to a whole class of business-intelligence offerings from big-name vendors like SAP, IBM Cognos, Oracle, Microsoft and others.

Another important consideration for the study's researchers was assessing company data's ability to be shared. They examined businesses' capabilities for remotely accessing their data and applications. Similarly, they also checked into how businesses' data supported sales mobility — the ability of salespersons to exchange price quotes, order information and delivery information via portable devices.

The study concluded that enterprises' return on assets — an indicator of a company's ability to efficiently use its resources to generate income — can be boosted by intelligence and remote accessibility. Sybase said a 10 percent increase in both would increase return on assets by 0.7 percent, pushing the median return on assets in the study to 10.95 percent. The report said the results would be the equivalent of squeezing $2.87 million of additional income out of businesses' assets.

Sybase noted that return on equity, a telling indicator of a business's ability to grow, is significantly affected by data quality and sales mobility. Sybase said improving both those data attributes by 10 percent increases return on equity by 16 percent. The median income of organizations in the study sample was $410.47 million, so a 16 percent increase in return on equity would equate to an additional $65.67 million in net income per year.

Return on invested capital measures efficiency in allocating capital to profitable investments, and the study found sales mobility improved return on invested capital. Sybase said a 10 percent increase in sales mobility improves return on invested capital by 1.4 percent. A median Fortune 1000 business that held the amount of its capital constant ($2.144 billion) would increase its net income by $5.4 million each year under this measure.

Page 2: Turning Data into Dollars

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Turning Data into Dollars

Sybase said the study definitively found that even the most incremental investments in improving the versatility of data has a dramatic effect on employee productivity, return on equity, return on invested capital and return on assets.

"Despite decades of IT investment in information technology, the direct correlation between those investments and the financial performance of the business has eluded senior decision-makers," Anitesh Barua, a distinguished teaching professor and lead researcher at the University of Texas at Austin, said in a statement. "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."

However, it's not clear how many businesses have gotten the message so far, despite a good deal of crowing about the need for improved business analytics from the major enterprise software vendors. Accounting and consulting giant Deloitte last week reported that a poll it conducted found that a third lack or aren't aware of their business's enterprise data analytics capabilities. More than half also said enterprise data is trapped in silos or shared across business functions only in limited ways.

Still, there's some hope for getting the word out, with Sybase and the University of Texas continuing their joint work. Another round of research, according to Sybase, will apply the same data to examine customer-focused effects on areas such as the ability to innovate to derive revenue from new products. A second will apply the same data to examine the ability to expand the existing customer base and operational effects on areas such as asset utilization, the accuracy of planning and forecasting and on-time delivery of products or provisioning of services, respectively.

Thor Olavsrud is a contributor to InternetNews.com, the news service of Internet.com, the network for technology professionals.

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