Big Data for Revenue Generation, not Cost Savings

Dateline: August 2, 2013

Welcome to our Friday WRAP – one thought-provoking idea to think about over the weekend.

Finding new ways to utilize data is on everyone’s agenda these days.  A recent HBR blog summarized an interesting survey done by Tata Consultancy Services (TCS)   of large global companies found that companies who made large investments in their big data projects generated excess returns, gained competitive advantages and put competitors at risk because they were able to get up the learning curve faster and more effectively. Blog author Satya Ramaswamy,  vice president and global head of TCS’s Digital Enterprise group, summarized the findings,

Specifically, our study found that the companies estimating the greatest returns last year on Big Data outspent those with much smaller ROI by a factor of more than three — a median spend of $24 million vs. $7 million. Of the 53% of the survey respondents that had Big Data initiatives in 2012, median spending per company was $10 million, a relatively small amount given that median revenue was $6.9 billion. But that median spending masks a great polarity in Big Data investments — a huge gulf between companies that have embraced it and those that are slow to adopt. A narrow slice of the respondents (7%) with Big Data initiatives in 2012 invested at least $500 million each on Big Data software, hardware, data scientists, consultants and other related expenses. On the other end of the spectrum, 24% spent less than $2.5 million apiece on it last year.

One interesting finding from this survey was that there is diminishing returns from a big data strategy focused on cost-reduction.  Leading companies use big data for revenue generation:

Finally, the Big Data can help businesses identify unnecessary costs, cost-reduction strategies face diminishing returns. Companies such as Netflix, General Electric and LinkedIn have revealed far more potential in using Big Data in sales, marketing, R&D and other revenue-generating activities to drive growth.

What are the revenue-generation activities for big data in your organization?

That’s a WRAP!  Have a nice weekend.

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