Sybase and University of Texas Study: 10 Percent Increase in Enterprise Data Usability Can Translate to $2 Billion in Annual Revenue

09/02/2010

Sybase, Inc., an SAP company, revealed the results of a new report – ‘Measuring the Business Impacts of Effective Data’ – an extensive study benchmarking some of the world’s leading enterprises across a wide range of industries by measuring the direct correlation between a company’s IT investments and overall business performance.

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The study also reveals which vertical industries would be the largest benefactors of improvements to effective data, and these include retail, consulting services, financial services, telecommunications and energy/gas services.

Conducted by researchers from the McCombs School of Business at the University of Texas, in conjunction with the Indian School of Business, the study looks at five distinct attributes of data—quality, usability, intelligence, remote accessibility and sales mobility—and examines how a 10 percent improvement in any one or two of these attributes affects the metrics commonly reported for assessing the financial performance of businesses. Unlike previous studies in this area which have failed to correlate specific financial impacts to the amount businesses spent on IT, this first-of-its-kind research holistically quantifies the impact of improving data’s effectiveness on financial metrics that are key indicators of an enterprise’s competitiveness, health and profitability.

“Despite decades of IT investment in information technology, the direct correlation between those investments and the financial performance of the business has eluded senior decision-makers,” said Anitesh Barua, distinguished teaching professor and lead researcher, University of Texas at Austin. “This is the first study that quantifies the relationship between incremental improvements in data and key performance metrics of businesses today. Previous studies tell us neither the magnitude of the effect on performance nor what it takes to improve the attributes of data. We are encouraged by our findings and expect the business community to take notice.”

According to Part One of the study that looks at ‘Financial Impacts of Effective Data,’ even the most incremental investments put towards improving the versatility of data deliver dramatic impacts on the following key business performance metrics:

• Employee productivity, widely defined and measured by sales per employee, is positively influenced by the usability of data. According to the study, a 10 percent increase in data usability increases sales per employee by 14.4 percent. Applied to the median sales per employee ($388,000), the median organization could increase this financial measure by $55,900 per employee annually.



• Return on equity (ROE), an important indicator of a business’s ability to grow, is significantly affected by data quality and sales mobility. When both of these data attributes are improved by 10 percent, ROE increases by 16 percent. Applied to the organization with the median net income in the study ($410.47 million), a 16 percent increase in ROE would deliver an annual increase of $65.67 million in net income.



• Return on invested capital (ROIC), a measure of efficiency in allocating capital to profitable investments, is positively influenced by sales mobility. A 10 percent increase in sales mobility increases ROIC by 1.4 percent. Applied to the median value of ROIC in the study’s sample, this improvement would increase its ROIC to 19.4 percent. If its amount of capital is held constant ($2.144 billion), this Fortune 1000 business would increase its net income by $5.4 million each year.



• Return on assets (ROA), an indicator of a company’s ability to efficiently use its resources to generate income, is positively impacted by intelligence and remote accessibility. A 10 percent increase in both attributes increases ROA by 0.7 percent, pushing the median ROA in the study to 10.95 percent. The corresponding reduction in assets would be $28 million, resulting in the equivalent of squeezing $2.87 million of additional income out of the business’s assets.

“For over 25 years, making data more effective for business has been the singular focus for Sybase, and the results of this study – particularly in today’s highly challenging and competitive business environment – underscores the importance of making data effectiveness a business priority,” said Dr Raj Nathan, senior vice president & CMO, Sybase. “As the volume of data continues to grow, organizations of all sizes must confront the challenges around managing, analyzing and mobilizing data in new ways. This study deductively shows that even the most pragmatic improvements in data efficiency can lead to measurable financial gain.”

The second and third parts of the study (to be released later this month) will apply the same data attributes to examine customer-focused impacts on the ability to innovate to derive revenue from new products and services, and the operational impacts of effective data with a focus on improving the accuracy of planning and forecasting.

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