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Valuing data on balance sheets vital for European businesses, economies

SAS, Cebr study: To reflect true value of big data and analytics, European businesses need new accounting practices

In the wake of the financial crisis and subsequent regulatory and compliance initiatives across Europe, businesses have discovered the importance of big data and analytics to their short- and long-term success. Yet using current accounting methods, these businesses struggle to reflect data as a valued asset on their balance sheets.

According to a new report, “Data on the Balance Sheet,” recognising the value of data goes beyond company interests; it is vital in valuing national economies. Current accounting methods do not capture its importance, and the lack of awareness of data’s potential hampers policy decision-making.

The report is from the Centre for Economics and Business Research (Cebr), a London-based economic and business consultancy, and SAS, the leader in business analytics. The report discusses European companies’ ability to use the insight gained from big data analytics to improve customer relations, streamline production and develop new products. Because data provides potential future economic benefits, it should be regarded as a company asset.

Businesses already account for the cost of collecting, storing and analysing data. Yet they do not adequately account for the value of data, nor for the potential from its development and use.

Cebr CEO Graham Brough says what’s required is a forward-looking integrated accounting framework that shows investors a comprehensive view of a company’s value, including how they value their data.

“There are three ways to assess the value of data: on its market value, via the cost of collecting it and by the income derived from it where markets do not exist and value is sensitive to external competitive and regulatory factors. These three ways have limitations when it comes to depreciation, so we need to find systems outside traditional accounting practices that not only take into account financial and physical capital but also human, social, relationship and knowledge capital. We need forward-looking reports that include a company’s future prospects and not just a review of its past performance.”

A new framework that better accounts for the value of data will provide a stronger macro-economic platform for policy-makers across Europe. The need for such a framework is further supported by SAS-sponsored research across Europe on the potential of big data analytics:

  • Data equity: Unlocking the value of big data, showed that big data had the potential to add £216 billion ($327 billion) and 58,000 jobs to the UK economy by 2017. This Cebr report showed three main drivers for this growth: business creation through the emergence of new small and medium-sized businesses; efficiency gains through better use of customer intelligence and supply-chain improvements; and innovation through development of new products and markets.
  • A similar Cebr study on the Irish economy, released earlier this month, revealed that Ireland could add €27 billion ($35 billion) and 6,000 deep analytical jobs to its economy by 2017 if it realised the full potential value of its big data.
  • Of the 110 French companies and public authorities interviewed by Markess International, a third were actively seeking to manage big data within their organisations with a specific focus on insights revealed by analytics.
  • A study conducted by the University of Potsdam, Analytics as a competitive factor, indicated that 90 per cent of German public sector decision-makers felt the strategic use of business data impacts the success of an organisation.

“What Europe needs to jumpstart its economy is inclusive growth enabled by three pillars: increasing employment via the digital economy, unleashing its service economy and enabling innovation in its traditional economy,” said Mikael Hagstrom, SAS Executive Vice President for Europe, Middle East and Africa, and Asia Pacific. “Better use of big data and analytics delivers big value and can play an important role in achieving each of these pillars. If accomplished, these pillars would provide the funds needed for Europe to invest 3 per cent of its GDP in R&D – a strategy expected to create 3.25 million new jobs and have a tremendous impact on Europe’s economic recovery.”

Today’s announcement came at The Premier Business Leadership Series event in Amsterdam, a business conference presented by SAS that brings together more than 700 attendees from the public and private sectors to share ideas on critical business issues.