Benefits & Risks of Open Data for Middle Market Companies

Big data is all the rage in today's business world and one of the big technology trends of the past year for middle market companies. Open data, which is free data made available to the public for use, is an interesting twist on that trend, especially with governments starting to take part. Information that could otherwise be difficult and expensive to obtain is suddenly available for the asking, and this could certainly be beneficial for companies.

The government makes information available through open data initiatives.

Open data is important because governments sit on massive amounts of information concerning a variety of subjects — economics, consumer or industrial trends, transportation, energy, census demographics, agriculture, and more. Although McKinsey says it could unlock $3 trillion in economic value, open data has quickly become controversial for a number of reasons, including the question of whether governments will sustain it for the long term and concerns that the data could be used for biased purposes. There are additional concerns for middle market companies, as well, particularly surrounding the scope of the data that is available and whether these companies have the right tools and know how to use them properly.

Does open access to government data troves ultimately help or hurt middle market companies? The answer is, it probably helps, although businesses should realize the potential problems involved.

Open-Data Access Benefits

The combination of open and big data can, and does, help middle market companies. For example, moving company Allied Van Lines uses data from the Department of Commerce and the US Census Bureau to help identify areas with significant changes in population and economic activity, which can indicate areas that might have particularly strong needs for its services. National Van Lines uses the same sources. Carfax incorporates data from multiple government sources — including the Department of Transportation, the National Highway Traffic Safety Administration, and many state and local governments — and manipulates and correlates it to provide the used-car information services that it markets to the public.

Whether high tech, financial services, energy, transportation and logistics, manufacturing, or other industries, government data troves can offer information that companies can turn into actionable insights. Marketing, operations, regulatory compliance, competitive research, and strategic planning are just a few of the areas that can benefit.

Open-Data Access Risks

For all the benefits, however, open data is not without problems. According to McKinsey, there are potential risks when it comes to open data.

For example, individual privacy and security could inadvertently be threatened if something is made public that should have remained confidential. Because of data privacy regulations in the US and abroad, if companies reveal excess data, they could be liable for fines or damages. Liability might also come about because of a lack of data-ownership standards and legal precedent over who owns what.

In addition, governments might experiment with open-data availability, making a source available one day and not the next. They might also change formats and definitions, which could significantly alter the nature of data, and if users aren't aware of the changes, the results could negatively affect analysis and decisions based on it. Officials might have a "vested interest," according to Gartner, and deliberately make selective data available as proof of their own effectiveness.

And finally, many middle market businesses may lack the resources and internal understanding of how to manage the potentially massive amounts of data in order to mine useful information from a cluttered sea of information. Mid-sized firms may need to contract experts to parse and prepare data sources so that they are useful. Start-ups might even arise to manipulate and prepare the data for use.

Final Thoughts

Middle market companies should consider using open data, but with care. Using any type of data could evoke any of the aforementioned risks, but the potential advantages that a middle market company could gain will far outweigh the considerations and care that they will have to apply during implementation.

How cautiously should midmarket firms move forward when making decisions based on open-data information? Let us know what you think by commenting below.

Erik Sherman is an NCMM contributor and author whose work has appeared in such publications as The Wall Street Journal The New York Times Magazine Newsweek, the Financial Times Chief Executive Inc., and Fortune. He also blogs for CBS MoneyWatch. Sherman has extensive experience in corporate communications consulting and is the author or co-author of 10 books. Follow him on Twitter and circle him on Google+.


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