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Beware of Big Claims About Big Data

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The power of big data is not in the amount of data you collect, but the patterns you can identify, according to Stephen DiFranco, founder of The IoT Advisory Group.

“It not just that it’s big,” he told ThinkAdvisor. “There have to be patterns that you can find in it, and that are meaningful patterns that you can derive insight” from.

DiFranco doesn’t believe data is a commodity or the “new oil” because “everyone’s data is different,” he said. However, “is it a new product? Is it a new material that we will have commerce around? Yes.”

DiFranco said data will become the product of commerce as businesses start to collect more varied data about their operations. A hotel, for example, may know exactly how many guests are staying in the hotel or how much the bar has taken in, “but it’s probably the exact same data set they collected in 1942,” DiFranco said.  

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“We don’t know the efficiency utilization of traffic patterns inside this bar, but we will in the future because that will become a piece of data that will be important,” he noted.

A restaurant knows how many times it can turn over a table in one night, but big data can show it how to optimize the menu to increase turnover, he continued.

Data becomes even more powerful when it’s compared to an entire industry. “That’s where the power of the commerce of data [comes from]. It’s not, ‘I’m going to go sell it,’” he said. “It’s, ‘I’m going to go make it participate with like sets of data from other service companies, and it’s going to teach me’” about my business.

Microsoft is one example of a company that has benefited from shifting its business model to focus more on big data, he noted.

Microsoft’s Azure cloud solution has taken the firm through a “tremendous metamorphosis of the valuation of their company, going from an enterprise and consumer software licensing company” to one supported by big data, and switching to a subscription pricing model, charging customers monthly for products like Azure and Office 365.

“The Street has rewarded them for that strategy change,” he said. Microsoft’s revenue from cloud services and server products was up 15% in the third quarter of fiscal 2017, according to an earnings statement released in April. That increase was driven by 93% revenue growth in Azure. Revenue from Office commercial products and cloud services increased 7%, driven by 45% revenue growth in Office 365. Revenue in consumer products and services was more than twice that high at 15%.

DiFranco believes one reason that “the Street has rewarded” Microsoft more than IBM is that it “is trying to solve what I call an end-to-end big data problem.”

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Many customers who are looking for a big data solution will already be Microsoft customers. “Companies that are able to provide a more complete solution, from your everyday work to your big data work, have been rewarded more by the market,” he explained.

Even if a company has a more powerful big data engine, “moving data is really hard,” he continued. Firms that control more data for more clients have an edge over those that might have superior technology.

A new category is taking shape of big data firms offering “building block” solutions for companies to build their own big data tools. These haven’t fared as well, he said, “because big data is still a very young industry that very few people really, truly know how to use well.”

— Read FINRA Launches Innovation Outreach Initiative on ThinkAdvisor.