My previous blog on data flagged that the digital revolution enables great masses of data to be generated, collected, stored and analysed relatively quickly and cheaply.
At the start of this process of digitization, data was stored on-site on tapes, discs and then hard drives sitting inside specialised computers called servers. In the dim and distant past (1994) I remember buying a new server for my employer with (wait for it) 1 whole gigabyte of storage. At the time this seemed excessive and I never expected the space to be used. However, twenty-four years later, our family of four have hand held devices with around 12,800% more storage space than that – most of it already used.
The use of on-site digital data storage proved to be transient phase. The creation of very fast, reliable internet connections enabled data to be cheaply stored off-site in “the cloud” by specialist, scaled providers without impacting the almost instant availability of the data to the user.
In addition, the fast, reliable internet enables software suppliers, who used to deliver their software to customers on discs so that customers could load the code onto their own desktops or local servers, to store the code on their own servers in the cloud. The fast internet enabled customers to easily access that software on-line and providers could update their software without the cost of mailing out thousands of new release discs to customers. This business model became known as Software as a Service (SaaS).
There are clear benefits to both customers and suppliers in using this model. But there is a side effect – it has created ambiguity around the question of data ownership. When the data was stored locally on the user’s equipment there was little doubt about data ownership or the ability of the data owner to exclusively access and analyse their own data. In the SaaS model, data is stored on the supplier’s equipment (or equipment rented by the supplier) and data ownership, access and the ability to analyse that data becomes subject to the law and the contract between supplier and customer.
We already know that data has great value (just look at Facebook) so when a business uses a SaaS provider it is potentially giving them away a business asset for free whilst paying that provider for the privilege.
Leveraging digital data commercially is often described as a “data play”. They are easier to pull off when one party understands the value of data and the other party does not. Acquiring a valuable asset for free is an excellent trade and the ability to arbitrage the knowledge gap around the value of data has already created more wealth than any other transaction type in history.