Report: Companies Eyes External Data To Enrich Datasets, ML Models
As 2022 approaches, organizations will likely escalate their use of external data sources to fill in gaps from outdated internal data. IDN looks at a report from Explorium, which shows the benefits and barriers to onboarding external data for big ROI.
As 2022 approaches, organizations will likely increase the use of external data, as doing business in the Covid era has revealed how easily internal datasets can quickly become outdated -- or even obsolete.
A study from Explorium finds companies say external data is "very valuable" for such enhancing data as foot traffic, pricing data, firmographics, technographic and financial metrics. The Explorium 2021 State of External Data Acquisition Report found organizations increasingly plan to use third-party data in five main areas:
(1) to improve their analytical and machine learning models
(2) understand buyer behavior
(3) improve conversion rates
(4) assess risk and
(5) detect fraud
Even as external data becomes more valuable, many organizations admit they face challenges in the best ways to adopt and profit from such data, the report also found.
"With more than 90% of external data buyers reporting that they struggle to find relevant data, and 77% admitting that they don't even know what to look for, this report makes a clear case for automation," said Maor Shlomo, Co-founder and CEO at Explorium in a statement.
Explorium Defines Benefits, Challenges to Using External Data
IDN looks at some of the Explorium report's insights and conclusions. Among them:
Organizations value data acquisition but lack a clear strategy
The Explorium survey found a vast majority say external data is essential to their business. In fact, 79% of respondents call such data "very valuable." That said, less than one-third said they have a strategy in place for obtaining external data. Some one-fourth (26%) rely on informal processes. Perhaps most remarkable, 7% of respondents admitted they find external data acquisition so challenging, they don't do it at all.
Multiple vendor relationships often slow down external data acquisition
The survey found nearly all companies (98%) engage with at least two data providers in their external data acquisition strategy. Of those, 69% engage with three or more. The more relationships, the more complicated working with external data becomes. To get more effective, organizations should centralize processes with a single vendor.
Most organizations need to discover and onboard external data at scale
More than half of organizations purchase three or four types of external data. As the number of use cases, data sources and providers evaluated for each data source grows, this increases efforts exponentially. Organizations must find a way to make the process much more scalable.
Organizations lack a clear set of data acquisition best practices
Even as companies say external data is becoming more important to their business, 77% of respondents admit they don't know what to look for in data acquisition. That has a severe impact on the effective use of such external data. 93% say that finding relevant external data is medium to high effort for their organization, and 94% say the same about deriving insights and features from their data.
From the report, Explorium also shared organizations types and usage goals for external data: In specific, the report noted:
The top three types of external data bought by companies are demographic data (62%), company data (56%) and financial data (56%), but the high numbers for each category suggested that most companies purchase external data on more than one category. In fact, we found that 32% of respondents purchase external data in 3 categories, 22% purchase external data in 4 categories, and 17% purchase external data from 5 categories or more.
When it comes to how this external data is used, the #1 usage is business intelligence (73%), followed by advanced analytics (72%) and machine learning and predictive models (69%). The high percentages alluded to most companies using external data for multiple purposes, and indeed 95% of respondents selected 2 options or more, and 55% selected 3 options or more. 15% of companies make great use of the external data they purchase for all practices.
As the number of business use cases grows in 2021, so will the amount of external data across all categories required to feed predictive and advanced analytics tools. Current efforts and costs of evaluating 2-3 data providers for each data sources are simply not scalable.
To resolve these challenges, Explorium's Shlomo said the report revealed ways to simplify complexity, boost ROI and improve security and governance of external data.
Shopping around with multiple external data providers creates cost, productivity and compliance challenges, Shlomo said. These can discourage organizations from leveraging all the possible benefits of external data and make adopting consistent best practices difficult.
In summary, "organizations need a single platform that can reduce the complexity of acquiring external data, demonstrate the uplift in predictive and machine learning models, ensure compliance and provide immediate access to the right insights," Shlomo added.
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