A year ago, an acquaintance was excitedly telling me about his company’s new business plan at a mixer at the IoT World Conference. The
company—a worldwide contract manufacturer—was going to become a data-broker. The company would retain rights to the data generated by equipment it produced. It would then use this data to analyze and improve products, or anonymize it and sell it to third parties.
Right about then, another acquaintance from a brand-name manufacturer sidled up. “Like hell you will,” the brand name manufacturer bellowed. “You work for me.”
Expect to hear some variant of this conversation every few days for the next several years. Silicon Valley is currently bonkers about data brokerages, and for good reason.
Data is the raw material of tomorrow. The lucky company that can come up with the magically delicious way to effectively harness it stands to achieve vast wealth and fame. Data, in theory, is also a low capital business. All you have to do it have access to information and/or how to shape it and you're set. OK, Uber is still losing money on every ride, but in theory it should work.
Unfortunately, the one thing many tech execs were counting on—that no one else would figure this out before they did—is clearly not going to happen. Manufacturers, end-users and others already know their information is valuable and they aren’t going to relinquish it freely. No more IBM giving Microsoft free rights to resell DOS, or Intel getting the blueprints to the microprocessor back as an afterthought.
“Why should we be paying for the data? Why shouldn’t OEMs pay us, the operators, for the data,” said Gavin Hall of Petronas, the Malaysian oil company at a recent event. Petronas was showing off PROTEAN, a home-grown analytics tool. “Perhaps we need to change the business model.”
So, does that mean digital transformation is dead? No, what is means is that the business model for sharing and using data will likely be different than what we’ve seen in the past. “Industry clouds” are an example of how the data industry might evolve. In industry clouds, companies share their (anonymized) data with an independent third party. Because they have access to data from multiple vendors, the third party can more quickly fine tune its algorithms and achieve relevant result quicker.
The catch? Often, these industry clouds are owned by manufacturers and others generating the data. Clarient, a company that helps seek out financial fraud, was formed and is owned by six major banks. Sage Insights, incubated by John Deere, provides data services to farmers. Likewise, you will see large companies like IBM buy companies with large data stores to help animate their algorithms: Big Blue’s Weather Channel purchase derived as part of its push into agriculture.
You’ll also likely see concepts come over from real estate law. One of the first things you learn in real estate law is that ownership is rarely exclusive. Cities and counties own easements for water and sewer lines over your property. Leases often deliver more rights than contract. You learn to think of a piece of property as a bundle of rights rather than a plot of dirt.
In the same way, you’ll see manufacturers provide access to their data in exchange for services, or for proportional interests in second-generation data produced through analyzing their original core information. Utilities will provide raw information for free, but advisory services based on insights from that information for a fee. Consumers can own their data, or agree to a lower cost infotainment system in exchange for full surrender.
A fluid spectrum, in other words, that will even make the OEM and its customers happy.
Michael Kanellos is senior manager of corporate communications and technology analyst with OSIsoft.