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
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
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
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.