Accounting for the Value of Your Company’s Data

Big data is changing the economy as much as it is changing business, ushering in a new data economy in which data can be exchanged for money or used in place of money.

Data is quickly becoming a valued resource and a bankable asset. Yet most businesses don’t post data on their profit and loss sheets and don’t report it as an asset to be depreciated to the IRS. Nor can companies borrow against the value of their data. So how can data be an asset when it doesn’t look or feel like other real assets?

Data Is Knowledge and Knowledge is an Asset

It’s helpful to think of data as knowledge, which is something that can be bought, sold and traded.

For example, when you graduated from college, you had knowledge. You could use this knowledge to get a job. The company that hired you bought your knowledge by hiring you.

Even if you didn’t get a degree, you can gain knowledge from experience then use that to get a job. So knowledge is an asset for both employers and employees.

Yet it’s not something that can be listed on a P&L as a taxable and depreciable asset or used as collateral for a loan. Why not? Because it’s nearly impossible to assign a value to knowledge because there are too many unknown variables.

The Value of  Data

Two college graduates might have the same degree, but they generally won’t perform exactly the same in the same position. Nor will two people with the same amount of experience perform the same.

So a specific value can’t be assigned because there isn’t an easy way to objectively measure the amount and usefulness of an individual’s knowledge or how they will use it in future situations.

The same holds true for data – a type of knowledge – that a company owns. Few companies have mapped their data holdings, let alone their applications and future market value. Yet without this type of clearly defined measurements, it’s almost impossible to assign a true value to data. Instead, data has to be considered a strategic asset rather than a hard asset.

Chief Data Officer

But this will likely change in the future.

Just as the finance organization manages money, and HR is responsible for intellectual capital, a new information organization may emerge, outside of IT, led by the Chief Data Officer, or CDO.

Currently, there are about 100 established CDOs, already more than twice the amount in 2012. Gartner also found that 65% of CDOs were in the US, which 20% were in the UK.

In the future, we probably will see companies become more efficient at accounting for their data assets. But for right now, it is unlikely that these assets will be considered anything but strategic assets.

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