A few words on a big subject: Big Data
Big Data is a massive and complex subject. In this article we touch on a few key aspects of understanding what it is, where it comes from and one of the ways in which we are investing in it.
The term ‘Big Data’ has been at the center of the digital revolution conversation but its meaning and application is often misunderstood. At its most basic, Big Data refers to large volumes of structured and unstructured datasets from traditional and non-traditional sources which is gathered, processed and utilized to drive insights which in turn enhance the decision making process and strengthen the users short to long term strategy. According to IDC, by 2021 at least 50% of global GDP will be digitized, and growth in every industry will be driven by digitally enhanced offerings, operations, and relationships.
Traditional sources of data include structured data that is clearly defined and is relatively easy to analyse such as direct sales and supply chain data, customer’s banking records or something as simple as a client’s name or height. This information is extracted from traditional sources such as online forms, company spreadsheets and medical records.
However, the expansion of the internet and the interconnecated-ness of the new global community has given rise to non-traditional or alternative sources of data. From trails of usable information left by the activities of internet users on social media platforms, via wireless sensors, machine to machine interactions and from company exhausts (data footprints). The data produced is often unstructured in nature given that it grows organically, but also uncontrollably like in the instance of customer’s online reviews of products and services, text messages, video imaging or machine generated data from heat sensors which do not require human intervention.
Four Factors of Big Data
THE RISE OF BIG, FAST DATA
The International Data Corporation predicts that by the end of 2020 there will be around 40 zettabytes of digital data, an increase of 300 times since 2005. What is a zettabyte? Well to put in into perspective, a zettabyte is 1000 exabytes and equivalent to all the grains of sand on all the world’s beaches!
Data Demand 2019-2025
Most of this new data will not be produced by people, rather this will be a collaborative effort between data networks, machines, and businesses.
For example, think of sensors; health and fitness smartwatches utilize sensors to monitor heart-rates and GPS mapping during exercise. The information is then sent to systems where the data is mined to produce coherent information regarding the intensity of a workout or the average pace at which the individual performed.
On the other hand, as economies begin to reopen and consumers head to retail outlets and malls, sensor enabled technologies such as automatic doors, industrial sized sanitizer dispensers and check-out conveyancer will become essential tools for ensuring social distancing is maintained and human-to-human transmission is contained. Additionally, these small consumer safety systems will provide invaluable data on spending and visitation patterns to businesses. These are just two use cases of sensors and the vast amounts of data that they produce which fosters greater convenience for consumers and powerful insights for firms.
With million if not billions of data points being generated daily, seasonally, or even event triggered, how do investors leverage their knowledge of Big Data’s growing importance into an investable opportunity?
STORING BIG DATA AND UNLOCKING THE CLOUD
This unprecedented explosion of data requires secure, reliable storage a need that will grow in parallel with the multitudes of daily digital footprints produced by people and machines. Traditional hardware is outdated, companies can no longer afford to house rows and rows of servers in a separate fireproof room as the speed of data generation far outstrips the capacity of mainframe computers. From a speed and connectivity perspective, businesses need to keep their internet bandwidth capabilities and cost restrictions in mind. Additionally, a firm’s ability to upload and receive data timeously is an important function of data mining and being able to use, for example, AI enabled technologies to uncover patterns in data in order for the information to be usable.
EQUINIX INC: A CORE BIG DATA HOLDING FOR THE ECM GIF FUND
The advent of the cloud and cloud computing introduces reliability and speed to a firm’s operations at a fraction of the cost of having these functions in house. With an 8-year CAGR of 14.2%, the global colocation data center market is poised to generate revenue of $105 billion by 2026. A notable leader in the data storage space is listed firm, Equinix (NASDAQ: EQIX), which is based in the United States of America.
Strategically operational in 52 markets across Americas, Asia-Pacific, EMEA and Europe, Equinix operates multi-tenant data centres and a variety of interconnection solutions. Data centres operate as physical intermediary between networks to enable interconnection ( E.g. emails passing from the Vox network or the Afrihost network first pass through a physical point at which interconnection can occur). Enterprises such as Netflix, are becoming increasingly interdependent and cloud- and digital-enabled, and to compete they require real-time data exchange and reliable, instant connections between and across any given digital ecosystem. Equinix has been identified as a key beneficiary of enterprises moving workloads into hybrid cloud architectures.
Equinix has a achieved a 5-year compounded annual revenue growth rate of 15.12% and closed the 2019 financial year ahead of expectations. The company drives value by investing both expansion and digital transformation activities which embrace their strategy for global interconnection and flexible architecture. Earnings trends over the last 5 years have produced a CAGR of 15.57% with EBITDA margins improving from 40.68% in 2015 to 44.36% in 2019.
Equinix Inc : Price Performance and Data Center Utilisation
Data is a fascinating agitator which offers multiple avenues for investment. The world of zettabytes and yottabytes has truly divided businesses into those that are reactive and those that are proactive. Proactive companies have found a means to utilise analytics and intelligence to empower their operations while capturing market share and ascending to top positions in their respective industries. New and fascinating views into consumer behaviour, the performance of competitors and rapid identification of emerging threats are just some of the benefits being unlocked in this new data driven world. Companies are moving towards elevating consumer’s experience through a discerning offering that cements customer loyalty and elevates the brand.
This article has only focused on one avenue for investment in the broader Big Data theme, however Big Data offers investors an opportunity to monetize the ‘new world’ in a multitude of ways. Data is not just information for a company, it is strategy, cost reduction, rejuvenated business models, moving from just understanding Big Data to actively monetizing it.