Why big data IR requires a new approach to transparency
The big data industry is a big money industry: a report published in July by Transparency Market Research estimates that the global market was worth $6.3 bn in 2012 and will grow to $48.3 bn by 2018.
Big data servicers – or ‘internet information providers’ – offer tools and technologies to help companies manage a spiraling volume of digital information. Most operate across sectors that need to deal with large amounts of neatly organized data, such as banking, healthcare, retail and education.
The basic components of a big data company’s offering include providing software and services, physical hardware to speed up the process and outsourced storage space, including via remotely accessible ‘cloud’ services.
Mellanox turns to clients such as hosting specialists Atlantic.Net to further its investor message via the video-sharing site YouTube
‘Our big data solutions help our customers solve the challenge of how to quickly analyze massive amounts of data that stream in from different sources at very high speed, by breaking a big data analytics job into smaller jobs,’ explains Gwyn Lauber, director of investor relations at Sunnyvale, California-headquartered Mellanox Technologies, a company that specializes in the upkeep of remote servers and storage systems.
The big data sector is concerned with unlocking value by making information transparent and easier to use. Most data firms offer a range of analytical services, many based on their own unique technologies.
Some companies develop their own big data-churning systems, such as retailers Amazon and Tesco, both of which use their own insights to drive retail activity and improve customer loyalty.
‘Investors are often surprised that our solutions are being adopted by markets beyond our traditional high-performance computing market,’ explains Lauber.
‘Because of the information that is now available to companies, supermarket chains are better able to offer their customers what they are shopping for, and financial institutions can better protect their online customers from theft by detecting fraud in real time.’
Business technology specialists ZDNet estimates that in 2013 US retailers will spend nearly $2 bn on business intelligence and other big data services. Some have already adopted such technology, as when shopping giant Macy’s appointed tech-head vice president Kerem Tomak three years ago to overhaul the firm’s data approach.
To better understand his customers’ shopping behavior and focus in-store promotions, Tomak set about installing in-house analytics software. Macys.com now analyzes tens of millions of terabytes of information every day, including store transactions and even Twitter feeds. The result? A reported 10 percent increase in store sales.
IR in such a sphere innately targets investors familiar with a wider view of the big data industry and of the multi-faceted issues surrounding it. ‘These investors are, in general, very technology-aware,’ says Lauber. ‘When it comes to our own services, many investors have to wear multiple hats so they are able to understand our technology alongside bigger trends in the market that could benefit from it.’
As a result, Mellanox’s IR program is targeted at a wide range of markets and sees Lauber’s team reaching out to investors in various different ways, including conferences across the US and through online webcasts and forums. The company also hosts a YouTube channel that features Mellanox’s co-founder and CEO, Eyal Waldman, along with interviews with several of its big data clients.
‘The flow of information and the decision to invest remain very relationship-driven,’ says Katrina Rymill, vice president of IR at data center provider Equinix. On the other hand, she notes that investors will come pre-loaded with a wealth of background reading: ‘With market information aggregators like Bloomberg and Thomson, disclosure documents and the internet, investors have access to an almost overwhelming amount of company data that helps bring them up to speed on the background of companies.’
To ensure the company’s voice is heard clearly, Rymill has helped to oversee a number of changes to IR at the Redwood City, California-based firm. ‘Technology upgrades like broadcasting our analyst day via video and our written blog have helped our message reach a broader audience’, explains Rymill. ‘I’ve also started to view the different networks of information among the investors as another channel that helps IR disseminate key information.’
Lauber points out that dealing with online-savvy investors means transparency is far easier to attain. ‘These days, I would guess that there is a better exchange of information between investors and IR professionals as we can find and share data on industry trends much more easily than we could in the past,’ she says.
With investors’ fingers held so close to the pulse of the companies they choose to back, how do IR teams effectively control the information that is made available?
‘I’d view it as one of the main roles of IR to pull investors up from the noise that may come with reporting quarterly numbers and focus on distilling results into three main messages,’ answers Rymill. ‘First, what is unique about our offering, and how we are developing it; second, what the barriers to entry into our space are; and finally, how our strategy translates into margins and growth.’
One of the strongest avenues for investor information is that of peer opinion, adds Rymill. ‘I had one investor talking to the head of our Americas division in the morning, and then a different firm called later that afternoon repeating back the exact information the first investor had said,’ she recalls. ‘Clearly the two investors had called each other.’
A changing landscape
At the same time, the big data investment landscape has changed rapidly in recent years, and investors might be forgiven for not being up to speed. While it has its roots in northern European and Scandinavian tech firms, the majority of big data business is currently conducted in the US, though Asia and Australia are emerging as strong, growing markets for trading data.
The Australian Government Information Management Office this year published its Public Service Big Data Strategy, intended to position Australia as a world leader in the public-sector use of big data analytics. The document suggests measures that would redesign how public services are delivered, an improvement in public policy and better protection of Australian citizens’ privacy.
In the US, however, the processes surrounding consumer data have been subject to extra scrutiny. Last December the Federal Trade Commission (FTC) launched an investigation into nine data brokers following concerns raised by US lawmakers. The Obama administration also published a Consumer Privacy Bill of Rights that further defined consumers’ rights with regard to their personal data, setting out a plan of action with Congress that would develop more robust privacy legislation.
At present, no laws in the US require that data firms maintain the privacy of an individual’s data, save for those in the credit, employment, insurance and real estate industries. ‘I’m concerned that consumers are unaware of this data collection-and-use activity or the companies that engage in it, and so have very little opportunity to exercise any current rights they may have to opt out, access or correct this data,’ said FTC commissioner Julie Brill at the time.
IR teams owe their investors a transparent view of their practices, though they cannot be held accountable for the controversies that might surround the sector. ‘As an IRO, I have always counseled executives to be as transparent as they can be with investors, providing a balanced view of the company and industry,’ says Lauber.
With similar data collection practices set to be adopted across the globe, the big data sector can only get bigger.