Who Wins From Big Data?

History often offers useful lessons about the development of new markets. Ask yourself what happened in the enterprise software business for a glimpse of what is going to happen in the "big data" business.

A couple of decades ago, there were perhaps 200 companies creating and marketing enterprise resources planning software to automate business processes.

What were the odds an investor would have picked SAP or Oracle as the eventual market leaders? Less than half a percent. Similarly, what are the odds an investor can pick the eventual leaders of the "Big Data" business?

However, if an investor had purchased stock in the 30 components of the Dow in 1990 that were all deploying ERP, that investor would have benefited from a 35 percent decline in overhead costs as a percentage of revenues, a 500-percent increase in revenues as automation enabled massive scale, and an almost 800-percent increase in market cap, say analysts Peter Goldmacher and Joe del Callar of the Cowen Group. 

"We believe the biggest winners in the Big Data world aren’t the Big Data technology vendors, but rather the companies that will leverage Big Data technology to create entirely new businesses or disrupt legacy businesses," they say. 

Big Data, in that sense, is a bit like broadband access. Investors probably will make more money betting on the enhanced fortunes of businesses that use broadband, rather than the suppliers of broadband. That isn't a criticism of the fortunes of broadband access suppliers; just a recognition that the value of all businesses supported by electricity is far greater than the value of firms that produce and deliver energy.