Tag: ROI

Big Data Investment: Which industries should be investing more in Big Data?

Big Data Study-Which Industries should be investing in big data?

There are at least two aspects to the question of  industries investing in Big Data:

  • Which industries should consider making greater-than-average investments in Big Data and analytics?
  • Which other industries have smaller numbers of early adopters of Big Data and thus have many companies that need a wake-up call?

To address the first question, we revisit the survey results on median industry spending on Big Data (Exhibit VII-1).

Exhibit VII-1: Which Industries Spend the Most on Big Data?

Q14 : Median Spending Per Company on Big Data in 2012 by Industry (in $ millions)

Exhibit VII-1: Which Industries Spend the Most on Big Data?

Four industries — telecom, travel-related, high tech, and banking/financial services – told us they spend much more than the median on Big Data. So what do these industries have in common? For one, they have high numbers of customer interactions (especially online). In addition, according to our data, three of them generate higher than average percentages of revenue from Internet orders. (See Exhibit VII-2.)

Exhibit VII-2: By Industry, % of Companies With Revenue From Internet Orders

Q2-a: Percentage of 2012 Revenue from Customers who order Products/Services  over the Internet by Industry

Exhibit VII-2: By Industry, % of Companies With Revenue From Internet Orders

While it may be easy to believe that if your company is not an internet company that Big Data is far less important to you, it’s not the case. The reason is that the way customers are interacting with companies online today go far beyond ordering merchandise from their websites. The points of digital interaction abound: social media sites such as Facebook, Twitter, and Pinterest; mobile applications that consumers use on their smart phones; sensors on machines that report their vital signs back to the manufacturer; and many more.

If you simply look at the early adopters of Big Data – internet companies that continually tinkered with their websites and mined their web viewer data to sell customers more of what they want – you’re likely to miss the next wave of Big Data adoption. These adopters, exemplified by companies such as General Electric, will use it to pinpoint fraud, predict machine failures, and make a wide range of other product and process improvements in their bricks-and-mortar businesses.

Now let’s look at the second question we posed: In which industries are a small minority of companies starting to pull ahead, thus industries where the majority need a wake-up call? Through our survey, we found a small minority of companies with projected ROIs on Big Data of more than 50% in four sectors:

  • Consumer goods (in only 9% of these companies did functional managers report ROI >50%)
  • Utilities (15%)
  • Insurance (17%)
  • Media and entertainment (19%)

That’s a sign that the clear majority of companies in these industries have a long way to go to catch up to the leaders.

Another way to shed light on which industries may have some of the biggest opportunities with Big Data is to understand which may be betting the “most bang from the buck” – the sectors with the highest projected returns on Big Data1 despite the lowest investments (i.e., Big Data spending as a percent of revenue). Exhibit VII-3 shows these to be energy & resources, life sciences, travel-related, banking, insurance and heavy manufacturing.

Exhibit VII-3: Who’s Getting the Biggest Bang from the Buck – and Should Strive for More?

Exhibit VII-3: Who’s Getting the Biggest Bang from the Buck – and Should Strive for More?

Plotted on a 2×2 chart, the data looks like this:

Exhibit VII-4: Plotting the Industries by ROI and Spending on Big Data

Spending on Big Data (as Percentage of Mean Industry Revenue)

Exhibit VII-4: Plotting the Industries by ROI and Spending on Big Data

Opinions may vary on which industries need to take the lead in Big Data. But one fact is undeniable for all 12 industries that we surveyed: The leaders spent more than three times what the laggards spent on Big Data in 2012. The median spending for leaders was $24 million; for laggards, it was $7 million. (See Exhibit VII-5.) With Big Data, there appears to be a certain level of foundational investments necessary to play the game at a high level.

Exhibit VII-5: Leaders Far Outspend Laggards on Big Data

Q14 : Median Annual Expenses on Big Data in 2012 Leaders vs. Laggards (in US $millions)

Exhibit VII-5: Leaders Far Outspend Laggards on Big Data

 


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  1. In this calculation, ROI is enterprise ROI, not functional ROI, as reported by the IT or analytics managers who answered the survey on behalf of the entire company, not a single business function. []

Big Data ROI – Highest Expectation from Logistics & Finance

Which Functions Expect the Highest Big Data ROI?

Big Data Study -  Big Data ROI - Highest Expectation from Logistics & FinanceIn addition to asking IT and analytics managers to estimate their company’s total returns on Big Data in 2012, we asked managers of business functions to calculate the big data ROI they expected in 2012 within their functional area.

Since sales and marketing had, by far, the largest shares of the Big Data pie, it would be logical to expect them to get the largest returns. However, that is not necessarily the case. In fact, two of the functions with the smallest pieces of the big data pie – logistics and finance – expected the highest Big Data ROI in 2012. Logistics managers expected Big Data to generate a 78% return, while finance managers expected a return of 69%. Both ROIs were far higher than the average Big Data ROI predicted by marketing executives (41%). (See Exhibit IV-2)

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Exhibit IV-2: Which Functions Expect the Biggest ROI?
Q17-b: Mean Percentage of Expected Returns on Big Data Investments by Function in 2012

Exhibit IV-2: Which Functions Expect the Highest Big Data ROI? | Q17-b: Mean Percentage of Expected Returns on Big Data Investments by Function in 2012

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We must note that the overall Big Data ROI average across all eight business functions that we surveyed was eight points higher than what the IT/analytics managers estimated across the company (54% versus 46%). We noted a similar pattern in the percentage of respondents who expected negative returns: Only about half the functional managers expected a negative return of 4.5% for 2012, compared to 8% for the IT/analytics managers. Therefore, depending on how you look at it, there may have been a “halo” effect among functional managers in projecting big Data ROI for the last year. Conversely, they may have had a more accurate estimate because of their greater knowledge of how their function used Big Data than the managers in a central IT or analytics group. In that case, the 46% Big Data ROI expected by the IT/analytics managers may have been understated.



Big Data Study Findings: By Business Function
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Return on Investment – Expectation by Industries

Big Data Study - The Emerging Big Returns on Big DataWe mentioned earlier in this report that the IT and analytics managers we surveyed estimated their expected 2012 return on investments in Big Data to average 45.5%. So which industries were on the high and low side of that mean? Two may surprise you.

Utilities and energy & resources companies had the highest expectations for generating returns on their investments, even though they spent far less than average per company on Big Data in 2012. The average return per utility company was 73%; for the average energy & resources company, it was 61%. High tech companies’ estimated 2012 ROI was also higher than average, at 52%, while banks/financial services companies were just lower than average (44%). (See Exhibit III-2)

Companies in the heavy manufacturing (29% ROI), life sciences (35%), retailing (36%), travel/hospitality/airlines (38%), and telecom sectors (38%) had the lowest expected returns on Big Data in 2012.

Exhibit III-2: Mean Expected ROI on Big Data by Industry

Q17 : Mean % of Expected Return in 2012 on Big Data Investments by Industry

Exhibit-3-2-big-data-expected-ROI-by-industry | Q17:     Mean  Percentage of Expected Return in 2012 on Big Data Investments by Industry

 

 



Big Data Study Findings: Industries
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Big Data Spending: Which Industries are in the Lead?

Big Data Spending - Which Industries are in the Lead?Travel/hospitality/airlines, telecommunications, banking/financial services and high tech companies rated higher on Big Data spending in 2012 than the other sectors that we surveyed (by median spending), as shown in Exhibit III-1.1

Travel/hospitality/airlines companies spent a median $25 million/company, as did telecom companies. High tech companies’ median spending per company was $17 million. Banking/ financial services companies’ median spending was $19.3 million per company.

On the opposite end of the spectrum were life sciences companies ($4.7 million) and energy & resources firms ($2.5 million).

Exhibit III-1: Per-Company Spending on Big Data by Global Industry

Q14 : Median Spending Per Company on Big Data in 2012 by Industry (in $ millions)

Exhibit III-1: Per-Company Spending on Big Data by Global Industry | Q14 : Median Spending Per Company on Big Data in 2012 by Industry (in $ millions)


Big Data Study Findings: Industries
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  1. In two of our 12 industries media & entertainment and consumer goods, we had low numbers of IT or analytics managers who answered this question. We have, therefore, not reported their figures. []