It is possible to put a financial value on Big Data Analytics

Introduction
For a few years now, companies have been making use of big data to optimize the
performance of their internal processes, as well as their relationship with customers and
other external entities. This tool has required large investments from companies to
implement ways of collecting, processing and analysing data. (Raguseo & Vitari, 2018) Of
course, these investments are expected to bring back results through financial and non-
financial results. Since the latter have a direct relation with data, the methodology to
measure the value generated by data analytics is easier to calculate and put in terms that
operative teams on the organization work with every day. On the other hand, the financial
relationship between information and how it financially contributes to the company is not
so clear and is more difficult to track. (Trieu, 2017)
In this text, we will address this issue and analyse the available literature to see if companies
can track the value which big data produces and what methodologies can be used to put it
in financial terms. In the first part, definitions on the key concepts will be given, followed by
an explanation on why it is important to identify a financial value of BDA and finally
addressing how this metric can be achieved.

Key definitions
Big Data is the field that creates and develops methods to extract and analyse information
from data sets which cannot be managed by conventional data-processing application
software, given their size and complexity. In this paper, we will refer to it as “Big Data
Analytics” or BDA, since we are talking about the whole process, from the gathering to the
analysis and reporting of the information. (De Mauro, 2015)
Financial performance is a broad term since it can refer to profitability, costs, investment
and revenue. However, since we have decided to approach BDA as a system that benefits all
the stakeholders involving an organization, we will treat financial performance as
profitability of the firm. This concept captures the value of costs and revenue and can be
easily related to the way BDA affects both. (Vasiu, 2019)

Why BDA should be given a financial value

Digital tools are properties of the companies that have cost and big data analytics are not
the exception. For collecting data in every step of the business processes, companies must
create an infrastructure that supports the collection, processing and analysis of information.
To do so, companies may develop platforms that track users’ activity in every step of the
customer journey. After collected, this information should be stored in a server that not only
has the enough space to constantly receive new incoming data, but that also allows the
proper connectivity to companies’ systems. Which means, all the computers used for
processing and analysing the information will be able to connect and read the information
properly when required. Finally, companies need for people with the skills to operate the
process, which add up to the fixed cost of develop analysis of Big Data. (Sun, Sun, & Strang,
2018)
The costs in which a company incurs when developing such an infrastructure must be
backed by a value they give in return, whether this comes in money, client attraction,
optimization of processes, or any other. However, the value which a company asset
generates is measured in vastly different ways according to how the asset is utilized by the
company. To give some context we will look at how other digital assets contribute with
value to companies and how they are connected to financial goals.
Platforms that companies use to meet the customer and generate transactions are
measured by how well they operate and endorse their relationship with customers; metrics
such as conversion rate and transactions per customer can be easily connected to financial
goals. (McArdle & Kitchin, 2016) On the side of the marketing teams, they develop a series
of campaigns to increase the value and number of customers. By looking at the number of
clients how much money they give to the company, marketing operations are also
translated into money. Finally, digital tools used in the daily operations of logistics teams’
impact on cost saving and other relevant rates. (Chen, Mao, Zhang, & Leung, 2014)
Thus, Big Data requires too of a valuation to check if it is being used properly when
compared to financial goals stablished by the company and to ensure that the value given to
the company is higher than the money spent on the tools used to create and operate the
infrastructure. However, giving a value to big data is not as easy since it is not always
directly connected to financial outcomes. (McArdle & Kitchin, 2016)

How Big Data Analytics create value

First, we need to understand how big data works in the value creation process of a
company. Unlike the traditional assets owned by a company, BDA work as enabler of
information for decision-taking at companies; the areas in charge of providing insights to
operational teams act as guides toward value creation decisions. In most businesses,
companies tend to have a central area, that operates the data infrastructure, gives
maintenance and provides analysis to the rest of the organization; sometimes they have
representants in these areas who develop activities to enlighten business decisions with
insights. (Trieu, 2017)
To collect data, they work mostly with product management and marketing team, which are
the teams with direct access to platforms that meet the clients in the different steps of the
journey. Product team manages the platforms through which the company operates and,
along with business intelligence, they will develop the technologic changes to websites and
applications to track user’s activity. (Trieu, 2017) Marketing team has also a direct contact
with the client and can use the channels of communication to get information about how
customer interacts with the company since the moment they see an advertisement until
they do of a transaction. Many other entities in the organization also develop activities that
can get information which can be helpful for analysis and improvement. (Ramesh &
Ramakrishna, 2018)
After the data has been gathered, its storage is managed by the central team; however, the
information is kept in servers that should be accessible to everyone who will analyse the
information. These analysts are specialists in accessing the information in the servers
through certain programs, who later convert the raw data into metrics that provide usable
information for other areas. (Ramesh & Ramakrishna, 2018)
Finally, all this information is used by employees to take decisions, from top management
level to lower steps in the hierarchy. Thus, the value created by Big Data is not the same for
every company and is allocated differently according to the quality of insights and use which
is given to it. It is generated in form of clients attracted thanks to the approach given to a
campaign because of the information received, quantity of time saved due to the new
routes chosen by logistics with the new information or increase in the conversion rate
because data indicated that customer journey was being addressed incorrectly by the
platform. (Trieu, 2017)

Giving a financial value to Big Data Analytics

Translating the value given by insights into a financial number that can be attributed directly
to Big Data is a complicated matter, although possible. It requires an analysing method that
connects the dots between the step of how this data is being used, what type of actions it is
generating and how big is the incremental income of money that comes with taking such
decisions. As mentioned in the previous paragraphs, Big Data contributes with increasing
the transparency when taking decisions that eventually will generate money. (Raguseo &
Vitari, 2018)
Most authors have used econometrical analysis to measure the exact impact of BDA on
financial performance taking in consideration the different ways of how it generates
business value, since it is possible to track its value in financial terms depending on how well
it accomplishes to help in daily operations and strategic decisions (Raguseo & Vitari, 2018).
Then, we need to look to the components that allow BDA to be valuable.
The system where information is stored must have at least six characteristics that ensure
quality of the infrastructure: reliability, adaptability to operative systems and computing
systems, integration between platforms, accessibility for all the necessary entities, low
response time and privacy. On the other hand, data of high quality must be complete,
accurate and collected as recently as possible; also, it should be formatted so that every
system involved is able to process it. (Ren, Wamba, Akter, Dubey, & Childe, 2017)
The dual quality makes the information usable and trustable for corporate use,
nevertheless, for it to be able to create financial value it must be built with three pillars that
support the corporate strategy:
 - Transactional business value: The ability of the information analysed to produce
business actions which produce inflow of money to the organization. (Someh & Shanks,
2016)
- Strategic business value: The information must be aligned to the objectives of the
organization; every metric and report must be oriented to whatever the business goal
that the team has established. (Grover, Chiang, & Liang, 2018)
- Transformational business value: Big data is always evolving and must help
corporations to achieve transformation through the constant improvement of internal
processes and innovating the way they approach customers. (Grover, Chiang, & Liang,
2018)
Some authors of papers about the topic have pointed out the variance of the results from
industry to industry, indicating that the most valid results can be found on IT-intensive and
highly digital industries, since they are the ones with the highest potential to make use of
big data tools. Less digitalized firms may struggle with the effectiveness when applying and
measuring these tools. Also, as the study of BDA is still relatively new, some researches
claim that it is recommendable to develop further studies in order to do a more
comprehensive analysis on the topic. (Müller, Fay, & Von Brocke, 2018)
Nevertheless, there are still other authors who have found methodologies that successfully
address the topic as we can see in the previous paragraph. The challenge is to address
certain limitations when trying to measure the impact of BDA on financial performance
given that the methodologies must deal with the fact that the relation between both
concepts is not direct in real life. The first one is that the most quantitative way to develop
an analysis on the matter has to be carried out with multiple regressions, so even though
data analysts in companies are able to elaborate them, they are procedures that cannot be
automatized, given that the historical data analysed will be different every time and the
validity of the results may vary from time to time; then, it has to be evaluated by a human
being. (Hirai, Y., Watanabe, & Tatsumoto, 2019)
Despite of these limitations, we can be certain that financial performance is affected by how
big data analytics are being used in companies. For example, this author attributes 4% of the
whole financial performance of several companies to the used of the tools. Others have
attributed up to 78% of the change in financial performance to the correct use of BDA. Thus,
although the methods in which the impact is measure can still be improved to be efficiently
used by companies, it is a fact that BDA affects finances of companies and the effect can be
measured. (Raguseo & Vitari, 2018)

Conclusion
As the reader has observed in this paper, Big Data Analytics is a tool useful for several
departments within a company, due to its capability of generating insights that enhance
daily operations to achieve better results through increasing the visibility of all the receivers
of the information. Teams can take actions based on the well-thought inputs of business
intelligence and data analysis areas. However, since companies have done an investment in
these technologies, it is important for them to know how well the assets acquired by them
are being used to bring value back to the company.
In this paper, we have gone through showing how BDA creates value in non-financial ways
for different teams across the company so that they can improve their daily operations.
Eventually, this support produces actions that generate steps towards the financial goals of
the company. Nonetheless, track these steps back to the input given by Big Data to allocate
a financial contribution can only be made with complicated econometric methodologies.
Thus, we have found that it is possible to measure the financial contribution of BDA as some
researches have already done, but the methods still can be improved and automatized to
provide a quicker feedback on the effectiveness of the use of this powerful tool.

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