In-Depth

Data for dollars: Reselling warehouse assets

• By Julie Hahnke
• June 7, 2001

Data warehouse ROI has long been a topic of bitter debate. Should ROI alone justify the huge development and deployment costs associated with an enterprise warehouse project? Some observers say yes. They believe that quantifiable business return should be the root justification and basis for the prioritization of any IT initiative. If the project cannot demonstrate an increase in revenue, cost reductions, and/or improvements in the efficiency, accuracy or timeliness of business processes, then it is not worth doing.Others argue that some functions enabled by the warehouse are so vital to the company and so difficult to execute manually that it is not even worth considering ROI. For these functions, automated support via the warehouse is a "no-brainer." It would take far longer to quantify the specific ROI when there is no question that the project must be undertaken. Business reporting is a good example of this
argument. Rolling up the financial condition of a large corporation and accurately reporting currency conversions, consolidations and eliminations across a large, complex business entity is enough to give even the most fastidious bean counter a headache. For example, one of my clients was recently asked if they considered an ROI justification for their business reporting warehouse project. "Why bother?" they replied. "We knew we absolutely had to build this system, regardless of what the ROI looked like."

Whichever argument one favors, the question of data warehouse ROI is raised to a new level when one considers the small, but growing group of businesses that have decided to turn their warehouses into profit centers. By reselling the data in their warehouses, these organizations can recover their significant investments in hardware, analytic application development, data modeling and data scrubbing, as well as extraction, transformation and loading (ETL) development and management tools.

Data as a new line of business

The reselling of data is not new. Data resellers have long existed in the information services market. Credit reporting agencies such as Experian (formerly part of TRW) sell credit histories on individuals and businesses. ACNielson and Information Resources Inc. capture and resell point-of-sale (POS) data to consumer packaged goods companies (didn't you ever wonder who was collecting all of that supermarket scan data?). And Claritas is one of the leading providers of marketing data, selling descriptive information used to enrich marketing databases and to support customer segmentation and analysis. These are just a few examples of the companies whose primary business is the reselling of data.

The story gets interesting, however, when one considers the companies that are not in the business of reselling data. For these organizations, the resale of their warehouse data may provide numerous, unlooked-for advantages. At a minimum, data resale can create new markets or new sources of revenue. The revenue from such an initiative can boost the ROI of any associated warehouse projects and, in the best cases, pay for the warehouse and fund further warehouse expansion. As a result, enhanced warehouse scope together with improved data quality and analytic tools can further strengthen a company's internal use of the warehouse.

Some businesses have been reselling data as a secondary revenue source for years. For instance, it is hard to imagine a magazine company that does not sell its subscription lists. But for all those businesses that do resell data, there are many more that have never considered it. It might be worthwhile for these companies to investigate this possibility, particularly if they have already invested in an enterprise warehouse architecture. These organizations may already possess (either partially or completely) the prerequisite delivery infrastructure, data content and quality necessary for data resale.

How a company might consider reselling its warehouse data is more easily understood if one first looks at an example of a business that has successfully done it.

WISDOM isn't free

In the exceedingly cost-conscious healthcare field, hospitals pay close attention to supply-chain management and cost containment. Effective product standardization, supplier consolidation and contract compliance can save hospitals hundreds of thousands or even millions of dollars. When products are purchased on contract, the hospital benefits from the more attractive pricing negotiated as part of the contract. Unfortunately, not all products are on contract; hospitals then have to pay more for off-contract purchases. Gaining control over the sheer volumes of hospital data necessary to effectively manage purchasing is not a trivial undertaking. The problem is further compounded by the fact that hospitals are typically owned by larger healthcare providers that may be unable to view their aggregate purchasing because of disparate or incompatible back-office systems between sites.

Owens & Minor Inc., Richmond, Va., is the country's largest distributor of medical and surgical healthcare products. Supply-chain management is serious business for this $3-billion giant that sells tens of thousands of products from countless suppliers to thousands of hospitals and integrated healthcare systems. The firm's typical customer, an average-sized hospital, might spend $30 million a year to buy anything from surgical gloves and paper towels to
orthopedic implants and open heart procedural packs.

To help customers that were unable to provide their own purchasing reporting, Owens & Minor decided to open up access to its own data warehouse. The new service is called WebIntelligence Supporting Decisions from Owens & Minor, or WISDOM. It was named after Business Object's WebIntelligence 2.0 product, the browser-based analytic
platform on which WISDOM is based. According to Don Stoller, Owens & Minor's director of information management, the service allows customers self-service access to their own purchasing data. Since the service began in 1998, demand for WISDOM has been growing steadily. A virtual tour of WISDOM can be found on Owens & Minor's Web site at http://www.owens-minor.com.

Using WISDOM, a customer can access their previous three years' of data regarding product purchases and usage, product inventory, contracts and pricing, and orders and shipments. A set of pre-canned queries, tables, charts and graphs answer customers' most frequently asked questions. WISDOM can also be used to identify opportunities for supplier consolidation, product standardization, movement of off-contract purchases into more advantageous group contracts, improved contract negotiation and to generally manage contract compliance. And Owens & Minor's customers are not the only ones benefiting from WISDOM. Suppliers can now see the full length of the supply chain, and better understand who is ultimately buying their products and how they are being used. Suppliers can also analyze market share, customer purchasing habits and customer retention.

Interestingly enough, Owens & Minor charges both its customers and suppliers to use WISDOM. "There was a big debate over whether to charge for WISDOM or to provide it at no charge as a value-added service," said Stoller. "We decided that the service would be perceived as more valuable if there was a price tag attached." Customer pricing is based on an annual subscription fee and an additional per-user license fee. In order to build an installed
base for WISDOM, the subscription fee is currently waived during a customer's first year of service. Suppliers pay a fee based on their dollar volume of business with Owens & Minor. "Once users see what WISDOM can provide, there's not much resistance to the price," noted Stoller.

To sell or not to sell

While Owens & Minor resells its data to customers and suppliers for a fee, they could have easily decided to provide the same access for no charge, as a value-added service for doing business with them. Clearly, charging a fee will generate revenue, increase ROI and fund further warehouse growth. But if a business still needs to invest in no-charge value-added services for its customers and business partners, these services could easily consume the revenue generated by the resale of the warehouse data. In other words, using the warehouse data to provide a value-added service is what is important, whether a company chooses to charge its users for that service or not.

What other types of services might be possible, given the existence of corporate warehouses? The limits lie with your imagination. A brokerage house might offer key customers pre-printed Schedule D's for tax returns based on their investment activities during the past year. A realtor might offer a periodic report to local homeowners on changes in local property values. An insurance company might provide corporate clients with access to historic claims data to help customers better manage healthcare planning and costs. These are only a few examples of how organizations might leverage warehouse information assets.

Is your data valuable to someone?

Might you have data in your corporate warehouse that is of enough value to someone that they would be willing to pay for it? The answer is probably. The next question that must be asked is, are you willing to share that data, even for a fee? The answer to this question is maybe. Obviously an organization will not sacrifice competitive advantage in order to generate some pocket change from its warehouse data. But depending on what the information is and who is interested in buying it, there may be numerous markets for a company's data that are acceptable options.

If your data is of interest to someone, it probably fits into one of three categories:

1 CUSTOMER DATA -- Most organizations maintain basic contact information about customers, including name, address and phone numbers. Many companies enrich this basic contact information with as many additional descriptive facts
as they can capture. The enriched data can enable powerful marketing analysis techniques, such as customer classification, segmentation and clustering. Many mail-order companies and magazines sell either their customer lists or use of their customer lists. In this case, it is the contact information that is being sold. However, if a customer list was extensive enough or well targeted to a specific type of customer, the description information about the customer may be of value as a source of enrichment data.

Reselling customer data is perhaps the most sensitive process, and may generate some legitimate concerns within a company. If customer data is to be sold, it must be done in such a way that a company does not risk losing its customers to competitors. Clearly, it is important to know who wants to buy the data and how they intend to use it.

2 PRODUCT DATA -- If a company's product or service offerings are extensive, and the individual products or services are very complex, product data may be very
attractive to both customers and prospective customers. National Semiconductor Corp., Santa Clara, Calif., is one example of a company providing access to its internal product information. The $2.5-billion organization manufactures and sells more than 30,000 different parts -- ranging from analog display circuits to thermal sensors -- to the electronic industry. National Semiconductor also provides its customers with access to an impressive array of technical part specifications and data through its Web site, http://www.nsc.com. Warehouse parts data includes complex formats such as system diagrams, behavior models, reference designs and datasheets.

In the financial industry, a good example of product data resale is EJV Partners LP, which was taken over by New York City-based Bridge Information Systems in 1996 (http://www.bridge.com). EJV, or Electronic Joint Venture, was formed in 1990 by six security firms, Citibank, First Boston, Goldman Sachs, Lehman Brothers, Morgan Stanley and Salomon Brothers. These companies recognized the difficulty in obtaining good quality, consistent descriptive and pricing data on the myriad of fixed-income securities traded at the time. EJV was founded to serve as a central collection point and distribution source of such data to its founding members, as well as to the greater financial community through resale. EJV, though it no longer
exists, was created specifically to resell the product information (fixed-income security products, in this case) of its member firms.

3BUSINESS TRANSACTION DATA -- Any organization that is part of a supply chain, whether it is the supplier, distributor or end consumer, may be interested in the business transaction data that is generated along that chain. Owens & Minor's WISDOM is an excellent example of the value of such transaction data to both customers and suppliers. When transaction volumes are large, transactions are complex, or when one or more middlemen separate the final customer from the product manufacturer, data resale potential probably exists.

In many cases, customers may already have all the constituent detail transaction data within their own systems. However, do not assume that this implies they can access the cleaned, consistent view of both detail and summary information required for business analysis. As Owens & Minor has shown, many customers would rather buy access to their own transaction data from an outside source than invest in the massive and expensive effort of integrating, scrubbing and warehousing that data themselves.

Getting to the data

Should an organization decide to resell its warehouse data, it needs to determine how customers will access that data. The most straightforward approach is to provide access to a customer warehouse via an analytic application interface. The data to be accessed is typically loaded into a warehouse or data mart dedicated to customer access. This provides a secure firewall between outsiders and the central corporate warehouse. The analytic application interface could be a custom application, providing value-added analysis specific to the data being accessed, or it could be as simple as a third-party query and reporting tool. Browser-based access clients are the clear favorite for customer access due to their ease of deployment and management.

In many cases, customers may have their own data sources that they would like to include in their analysis. There are two options for combining their data with the resold data. The first is to load the customer's data into your warehouse and to provide them secure access to the combined set of purchased data and their own data. Should this method be selected, security will be of prime concern to users; they will not want anyone else accessing their own data while it is stored in your warehouse.

The second option is to provide an extract of the resold data directly to the customer. In this case, the customer is responsible for integrating the extract with their own data and for providing their own analytic tools. In both cases, a standard data transfer mechanism needs to be set up to automatically handle the periodic refreshes. Again, the Internet provides an easy-to-implement standard for file transfers.

For example, EJV employed all three mechanisms as options to its customers. Some used EJV's analytic front-end against EJV's data sources; others added their data to EJV's and accessed the combined data set through EJV's software; and still others bought regular data extracts from EJV and loaded it into their own warehouses. On the other hand, most of Owens & Minor's customers access the resold data through WISDOM, although some do add their own data to the WISDOM warehouse for combined analysis, according to the firm's Stoller.

Is it worth it?

Clearly, reselling warehouse data is not for everyone. But where it makes sense, it can provide a new source of business revenue and a potentially valuable service to your customers and partners. Does it make sense for you? To determine that, look closely at your answers to these questions:

1 Is your data of value to someone? Whether it is customer, product or transaction data, do you have data that someone else might want? And, are you willing to give it to them?

2 Is that data already in a warehouse? If you already have a centralized, scrubbed source of clean, consistent data, then you are halfway there. It may not make sense to resell your data if you also have to invest in a warehouse project to first clean it up and centralize it. If, however, that has already been done, reselling may be more
attractive.

3 How will your customers access the data? Which mechanism will you use to provide access to your data? Will it be through your own infrastructure and interfaces? Will you allow customers to add their data to yours, or will you send them periodic extracts?

4 Will you charge for the data access?
Finally, if you decide to provide access to your data -- through whatever means --what is the value proposition to your customers? Will they have to pay for it or will you provide access at no charge as a service to them?

Data resale, when it does make sense, can recover the costs of the warehouse investment in a fraction of the time planned. It can also fund the further growth and enhancement of the warehouse, thereby benefiting not only an organization's internal usage of the data, but external customers accessing the data.