Alternative data sources are now a central component of many enterprise analytics strategies. For example, one survey found that 92% of investment organizations are relying on alt data to inform decision-making to a moderate or significant extent. While this data is often utilized by various business units, it typically falls to IT to manage alt data. With that in mind, following are some hidden alt data costs for tech leaders to consider:
Vendor Selection Costs
Vetting alt data providers and subsequently ensuring that the data they supply is of sufficient quality is a time-consuming—and often expensive—process. However, it’s essential that companies not rush through selection, particularly if the alt data will be embedded in a core business process. One strategy for obtaining confidence while simultaneously keeping costs down is to look to industry groups to help identify reliable alt data sources. Generally speaking, companies operating within the same sector have similar data needs and may be a good resource for ideas and best practices.
Determining Data Ownership
By its very nature, alt data makes it more difficult to validate data ownership than with data provided by more traditional, established vendors. This problem is compounded when multiple data providers have been combined prior to purchase, as difficulties may arise around licensing, intellectual property laws, and data protection regulations. Organizations can ease some of these concerns by selecting alt data vendors that provide transparency into their data sourcing methods.
Processing and Storage Concerns
Processing and storage costs are often another area that businesses underestimate. From a processing perspective, there is generally a lack of consistency in alt data in terms of update frequency, APIs, and data formats. Companies can incur costs in cleaning up this data, and these increase when it comes to evaluating storage options and ensuring they are appropriate for the ingest requirements of data models.
Finding the Right Staff
The skills shortage is a challenge in other areas of analytics and alt data is no different. As part of the solution, Forrester recommends companies partner with “data hunters,” who are responsible for finding viable alt data and validating it for accuracy and integrity.
For more on this and other ways in which companies can decrease the costs associated with alt data, take a look at this recent CIO piece.