By 2021, the prevalence of equity analysts valuing organizations’ information portfolios in valuing businesses themselves will spark formal internal information valuation and auditing practices, according to Gartner, Inc.
In a report containing a series of predictions about the rising importance of data and analytics, Gartner analysts said that although information arguably meets the formal criteria of a business asset, present-day accounting practices disallow organizations from capitalizing it. That is, the value of an organization’s information generally cannot be found anywhere on the balance sheet.
“Even as we are in the midst of the information age, information simply is not valued by those in the valuation business,” said Douglas Laney, vice president and distinguished analyst at Gartner. “However, we believe that, over the next several years, those in the business of valuing corporate investments, including equity analysts, will be compelled to consider a company’s wealth of information in properly valuing the company itself.”
A Gartner study showed how companies demonstrating “information-savvy” behavior — such as hiring a chief data officer (CDO), forming data science teams and engaging in enterprise information governance — command market-to-book ratios well above the market average.
“Anyone properly valuing a business in today’s increasingly digital world must make note of its data and analytics capabilities, including the volume, variety and quality of its information assets,” Mr. Laney said.
Initially, Gartner believes equity analysts and institutional investors will consider only a company’s technical data and analytics capabilities and how its business model provides a platform for capturing and leveraging information, not the actual value of its information assets.
Gartner says boards and CEOs should not delay in hiring or appointing CDOs to begin optimizing the collection, generation, management and monetization of information assets before a critical mass of equity analysts starts asking related questions of them.
