Sybase, Inc., an SAP company, has revealed the results of a new report, "Measuring the Business Impacts of Effective Data." The study benchmarks leading enterprises across a wide range of industries by measuring the direct correlation between a company's IT investments and overall business performance.
Conducted by researchers from the McCombs School of Business at the University of Texas, in conjunction with the Indian School of Business, the study looks at five distinct attributes of data-quality, usability, intelligence, remote accessibility and sales mobility-and examines how a 10% improvement in any one or two of these attributes affects the metrics commonly reported for assessing the financial performance of businesses.
According to Anitesh Barua, distinguished teaching professor and lead researcher, University of Texas at Austin, three surprising findings came out of the study. "Number one, after so many years of spending so much money on enterprise integration, data integration, enterprise mobility and all, I would have expected the data attribute level to be much better than what they turned out to be," Barua notes. "Generally, people tend to inflate not deflate their perceptions of how good the data is." It depends on how you look at it, he adds. "I would like to look at it as a positive thing, saying there is so much head room, so much room to improve here, rather than saying these numbers are significantly lower than what they should have been."
Number two in terms of notable findings, he says, is the "significantly positive correlation" between having better data attributes in an enterprise and the overall financial performance of the enterprise. "Maybe for the CIO this will be like preaching to the choir," but it may be a bigger revelation for other C- level executives starting with CEOs, as well as CFOs, and COOs. They may have been skeptical, but now may be intrigued enough to do a benchmark of their organization to examine its data attributes since the study shows clearly that if there is improvement in data attributes, there is great improvement in financial metrics, Barua observes.
And the last key finding is the "ubiquitous nature of the effect" for various industries, he says. It hasn't been "just three or four usual suspects," such as IT leaders like retail and financial services, Barua explains. "What surprised us pleasantly was that large sectors like construction show a huge promise." The analysis shows that if they spend money on improving data attributes, there are very large gains to be realized. "It is not just a phenomenon that affects just a few verticals; it is very broad."
According to Part One of the study that looks at the "Financial Impacts of Effective Data," even the most incremental investments put towards improving the versatility of data deliver dramatic impacts on the following key business performance metrics. For example, employee productivity, widely defined and measured by sales per employee, is positively influenced by the usability of data. According to the study, a 10% increase in data usability increases sales per employee by 14.4%. Return on equity (ROE), an important indicator of a business's ability to grow, is also significantly affected by data quality and sales mobility, according to the research. When both of these data attributes are improved by 10%, ROE increases by 16%. Applied to the organization with the median net income in the study ($410.47 million), a 16% increase in ROE would deliver an annual increase of $65.67 million in net income.
The second and third parts of the study will apply the same data attributes to examine customer-focused impacts on the ability to innovate to derive revenue from new products and services, and the operational impacts of effective data with a focus on improving the accuracy of planning and forecasting.
Click here to download a free copy of the first report.