Despite their growing importance, too many great algorithms in enterprise are still left in the shadows...But algorithms can make a great deal of difference. The list of important algorithms is endless
Gartner says by 2021, organisations will be valued on their information portfolios, and should prepare for it now.
In a report containing a series of predictions about the rising importance of data and analytics, Gartner analysts say that although information arguably meets the formal criteria of a business asset, present-day accounting practices do not allow organisations from capitalising it.
That is, the value of an organisation's information generally cannot be found anywhere on the balance sheet, they state in the report Predicts 2017: Licensing, Legal and Language Lessons for Data and Analytics Leaders.
"Even as we are in the midst of the information age, information simply is not valued by those in the valuation business," say Douglas Laney, vice president and distinguished analyst at Gartner, and one of the report authors.
"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" behaviour — 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," says Laney.
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 chief data officers to start optimising the collection, generation, management and monetisation of information assets before a critical mass of equity analysts starts asking related questions of them.
Gartner also predicts that by 2019, 250,000 patent applications will be filed that include claims for algorithms, a tenfold increase from five years ago.
Scrap traditional notions of ‘ownership’ when it comes to information assets; instead, focus on information rights and privileges with all vendors, partners, suppliers and customers.
Algorithm patents can be granted in the US, the EU and many other countries. Not all algorithms can be patented, but many can, even if the rules of application are not always straightforward.
According to a worldwide search on Aulive, nearly 17,000 patents applied for in 2015 mentioned "algorithm" in the title or description, versus 570 in 2000.
Including those mentioning "algorithm" anywhere in the document, there were more than 100,000 applications last year versus 28,000 five years ago.
At this pace, and considering the rising interest in protecting algorithmic IP, by 2020 there could be nearly half a million patent applications mentioning "algorithm," and more than 25,000 patent applications for algorithms themselves, says Gartner.
Of the top 40 organisations patenting the most algorithms the past five years, 33 are Chinese businesses and universities. The only western company in the top 10 is IBM at No. 10.
"Despite their growing importance, too many great algorithms in enterprise are still left in the shadows. Many business leaders don't care too much so long as they work,'" says Laney. "But algorithms can make a great deal of difference. The list of important algorithms is endless.”
Some notable examples are Google's PageRank algorithm, mp3, blockchain and backpropagation in deep learning, he states.
Gartner recommends data and analytics leaders work with business leaders and experts to adopt and develop methodologies for valuating algorithms and assessing which ones should be patented.
It recommends organisations to undertake the following:
■ Establish a common language for discussing all things data and analytics related, one that leaves little room for misunderstanding and enables clear, concise communication.
■ Scrap traditional notions of ‘ownership’ when it comes to information assets; instead, focus on information rights and privileges with all vendors, partners, suppliers and customers.
■ Develop and submit business-method patent applications for your organisation's key proprietary algorithms to ensure they are legally protected.
■ Plan to participate as licensors and/or licensees in data marketplaces/exchanges as a means to extend the economic value of your information assets.
■ Prepare for the day when most institutional investors and equity analysts start evaluating your company in part based on your data and analytics capabilities and wealth of information assets.
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