Data’s Struggle to Become an Asset

Cash, inventory, receivables, buildings, equipment are all assets that are listed on corporate balance sheets, as are more intangible assets such as licenses, patents, and software. But what about data?

Data’s biggest problem is that it is intangible and malleable. How can you attach a value to something that is always changing, may disappear, and has no physical presence beyond the bytes it appropriates in a database?

In many organizations, there are troves of data that are collected and never used. Data is also easy to accumulate. Collectively, these factors make it easy for corporate executives to view data as a commodity, and not as something of value.

Researchers like Deloitte argue that data will never become an indispensable asset for organizations unless it can deliver tangible business results: “Finding the right project requires the CDO (chief data officer) to have a clear understanding of the organization's wants and needs,” according to Deloitte. “For example, while developing the US Air Force’s data strategy, the CDO identified manpower shortages as a critical issue. The CDO prioritized this limitation early on in the implementation of the data strategy and developed a proof of concept to address it.”

If Data Is an Asset, How Do You Value It?

Data can be valued as direct revenue and calculated as both a carrying cost and as a depreciable asset.

Data as revenue: Allied Market Research projects that the data monetization market will reach $15.4 billion by 2030, growing at a compound annual growth rate (CAGR) of 22.1% from 2021 to 2030.

Companies are making money selling their data to others, and/or bartering data for services.

These exchanges could be accounted for on a corporate balance sheet -- but even if they aren’t, they can be getting tracked financially.

Data cost of carry: On the flip side of the financial ledger (expenses), the cost of carrying data can be accounted for.

This carrying cost would be derived from the amount of storage that data was consuming, the time it took IT or a cloud provider to service the data, and the allocations of facilities and power costs to support the data storage.

Not many companies actively do this. If they did, they would be able to take a closer look at which data they were paying for that they were actively using, and which data that they were cost-carrying only, with no benefit to the company.

Why does this matter? More than two-thirds (68%) of data available to enterprises goes unleveraged, according to a 2021 survey of 1,500 global business leaders conducted by Seagate Technology. That’s a lot of unused data to carry forward without reaping any benefit.

Data depreciation: Over a three-to-five-year time span, computer hardware is depreciated to reflect the fact that it is gradually losing value and becoming obsolete. This depreciation is recorded in the corporate books.

Data can also age and depreciate.

While there are real-time, transactional systems that continuously update data, there are also more stagnant data repositories where data is seldom or never updated.

Data deteriorates in quality as it loses currency and accuracy.

As data moves through its life cycle of “hot” to “warm” to “cold” data, a data depreciation formula could potentially be developed that reflects the diminishing value of these data assets, and that projects a time when the data is fully depreciated and useless.

Gartner projects that bad data costs companies 15% of revenue annually, and IBM reports that those businesses lose $3.1 trillion annually because of poor data, so there are important business reasons that argue for an initial valuation of data as an asset, followed by depreciation that is taken as data ages.

The Hidden (and Not So Hidden) Returns of Data

Beside those areas of data that can be computed financially, there are benefits to data that aren’t as readily quantifiable, but that contribute to the corporate bottom line.

There are cases where companies acquire other organizations, simply because of the value of the data that these acquisition targets possess. Companies also use their own data for strategic decision-making and for competitive advantage.

These data use cases present compelling reasons for executive management to view data as an asset.

Final Remarks

“Data as an asset is not only about how organizations of the future manage data, but also about how they can become information-centric organizations with data at the heart of their transformation,” stated KPMG.

From the CIO’s or CDO’S viewpoint, the task is often sensitizing other C-level executives and the board to the vital role of data as an asset in every company undertaking.

This sensitization can be accomplished on the “plus” side of the data asset ledger by demonstrating the value of data in revenues, decision-making, and even in corporate acquisition strategies. At the same time, the “minus” side of data as an asset can be evaluated by IT in terms of data carrying costs and depreciation so IT can determine how long data should be maintained, and which types of data should be eliminated.

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