Big data

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Big data is becoming increasingly prevalent in everyday lives. It’s influencing all aspects of life, with an increasing reliance on technology such as smartphones and the growing usage of the internet of things (IoT) such as Amazon’s smart speaker Alexa. This has caused large inflows of big data that companies can use to their advantage, presenting a variety of investment opportunities.

BIG DATA INDUSTRY 

According to the International Data Corporation (IDC), worldwide revenues generated from big data are forecasted to increase by 12% from 2018, reaching $189.1 billion in 2019. Furthermore, looking specifically at the software and services sector, big data market revenues are projected to rise from $42 billion in 2018 to $103 billion by 2027. Positive forecasted growth is reflected by the amount of high performing companies that populate this sector in the FTSE AIM All-Share.

Geographically, the United Kingdom will become the third-largest generator of big data analytics with predicted revenues of $9.2 billion, behind the United States ($100 billion) and Japan ($9.6 billion). This highlights the opportunities on offer in both the FTSE 100 and FTSE AIM All-Share with companies supplying both domestic and foreign markets.

A FTSE AIM stock that is embedded in this sector is Craneware, which focuses on the US market in the support and development of computer software in the healthcare space. The value-add that the company brings is by optimising the operational performance of a client's business via tools, such as data analysis to manage workloads, helping to maximise financial performance. The concept is clearly gaining traction within the sector, with the share price rising 264% since 2016.

By looking at big data through the lens of improved efficiency, the intelligence that it can offer companies can help to improve business operations and hence costs. For example, Blue Prism has created robotic process automation technology in order to provide a digital workforce to companies. In doing so, it removes the capital cost of staff such as wages, holiday leave and sick pay. By implementing this technology it can improve the operational efficiency of the company’s supply chain and reducing variable costs. By increasing fixed costs, as a result, the business becomes more scalable and pushes margins up due to a decrease in cost-per-unit.

Another example is growth AIM stock Tracsis who are based in the transportation sector. The company focuses on improving resource management through the application of big data technology. For example, traffic data can be analysed to identify key areas that would be the best allocation of capital for infrastructure investment. By optimising resources in key strategic points, investments can result in maximum traffic efficiency reducing opportunity costs. 

AREAS FOR CONCERN

However, within big data, there are also concerns that businesses have to face such as data protection and cybersecurity.

For example, identity management company GB Group faces several risks around data protection. The AIM stock is a specialist in identity data intelligence that covers a variety of ID verification software such as customer on-boarding. Due to the nature of the business, the company deals with very sensitive information. If there were to be a cyber-attack where such information was compromised, then the shares of the company would take a massive hit. It is therefore always important to understand what risks a company faces as these will be what ultimately holds back performance in the long term.

Though there are several areas for concern, the outlook for the sector still looks bright. With global and domestic revenues predicted to rise, the sector is offering attractive opportunities within the UK market, including listings on the FTSE AIM All-Share as mentioned. 

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