The age of big data

The age of big data

When we do a web search, publish a Facebook post, make a wireless call or stream an online video, we are producing and using digital information. As computers, machines, devices and wireless technology proliferate worldwide, the volume, variety and velocity of information being created and consumed is growing exponentially. That is ‘big data’.

One of big data’s key traits is its universal value. Retailers and advertisers can use customer data to tailor their products and target their campaigns. Schools can analyse test scores and class behaviour to help them teach students more effectively, while hospitals can improve their care by combining doctors’ observations with medical records. These practices rely on telecom companies’ satellites and networks to transfer and store data. And they need tech businesses’ hardware and software to analyse and garner insight from it.

Big data’s cross-sector utility can provide investors with exposure to multiple industries and countries. It has plenty of room to grow – a global survey by research firm Gartner found that two-thirds of companies are investing or plan to invest in big data, but only 8 per cent have actually deployed big data analytics. That didn’t stop global business intelligence and analytics software raking in $14.4bn (£8.4bn) in revenue last year, an 8 per cent rise from 2012. And research firm IDC expects the market for big data technology and services to grow by more than a quarter annually to over $32bn by 2017.

Accommodating that growth could be a headache though. It will require efficient networks, enormous data centres and cutting-edge software and devices. Fortunately, several UK companies have developed solutions while others have found uses for data in their operations. Their niches run the gamut from network infrastructure and handset testing to mapping and language translation.

For instance, companies reluctant to clog up their own systems with data can store it in the ‘cloud’ of data centres dispersed around the world. That service is provided by iomart group (IOM) among others. Building entire networks is even more costly and complex, so it’s no wonder that mobile operators and governments turn to Avanti Communications (AVN), which sells wholesale data telecoms provided by its three orbiting satellites. Avanti may be “the ultimate big data company,” says chief executive David Williams, as it provides the train tracks for data use. It recently raised about $158m to fund the development of its fourth satellite, which will expand its coverage of Africa and Europe.

The current rollout of super-fast “4G” broadband is another driver of soaring data consumption. Increasingly, mobile operators are “desperately trying to extract every drop of efficiency out of their networks,” says Anite (AIE) chief executive Christopher Humphrey. “Network capacity is simply not big enough to tackle the 11-fold increase in data consumption projected over the next few years.”

New technologies and greater data needs are good news for Anite, which tests handsets and networks for the likes of Samsung and AT&T. But a wave of consolidation in the handset industry dampened demand for testing last year, slashing its cash profits by a third.

Big data can also be applied to healthcare. EMIS Group (EMIS) provides software to over half of the UK’s GPs and a third of its pharmacies, enabling them to securely share information on patient allergies, medical history and medications. That helps to reduce waiting times and boost efficiency. The popularity of EMIS’s software helped its sales grow by 22 per cent last year.

Growing reliance on data in areas such as healthcare means data loss is more devastating than ever. WANDisco (WAND) combats that risk by instantly replicating data across all computers in a network. Its big data product, Non-Stop Hadoop – which combines its flagship technology with the leading big data platform, Hadoop - is already gaining traction. A Californian hospital is using it to manage its patient and machine information, while British Gas is using it for smartmeter data. The division is still small - contributing only $200,000 of the company’s $4.2m in subscription bookings in its first quarter - so we want to see more big-name buyers before we turn buyers of the shares.

Big data may seem like a space reserved for young businesses, but veterans are also making their mark. FTSE 250-listed Micro Focus International (MCRO) modernises companies’ computer systems to handle today’s data flows, saving them the hassle of buying new ones. For example, it upgraded Tesco’s systems so that customer information from each of its tills nationwide could be collected and viewed.

Micro Focus enjoys “sticky” demand, says chief executive Kevin Loosemore, because its software is integrated into their clients’ data-producing systems.

Perhaps the main draw for investors will be a potential 9 per cent yield this year and an attractive valuation of 14 times forecast earnings.

Big data is also benefiting advertisers, as they can use browser histories and other information to personalise their adverts rather than linking them to the content being viewed. “There’s a lot of hype, but big data is a big deal,” says Brian Mukherjee, chief executive of Blinkx (BLNX), which sells ad slots on its online video platform to the likes of L’Oreal and Gap. “Understanding that an Investors Chronicle reader also frequents a small knitting website allows that website’s owner to sell ads at a higher price.”

Blinkx recently acquired LYFE Mobile, a company that uses location, weather and environment to help target its adverts. For instance, if someone is out shopping and it begins to rain, LYFE might send an ad promoting a movie showing at a nearby cinema. That technology is promising, but a cloud remains over Blinkx’s shares, reflecting advertising industry weakness and a recent blog attack.

1Spatial (SPA) also uses location data. It collects and interprets information from land surveys, photographs and satellite images, then uses it to map out utilities such as water and sewage for businesses and governments. “Location is the master key to data,” says chief executive Marcus Hanke. “A constant x/y coordinate has great value.”

Before data volumes reached today’s levels, 1Spatial’s technology was equivalent to using “a sledgehammer to crack a nut,” says Mr. Hanke. Now it’s being used by clients such as Ordnance Survey Great Britain and the US Census, helping company sales climb 43 per cent last year. And 1Spatial’s ‘smart cities’ segment, which provides governments with visual data to help them manage traffic, pollution and other issues, has seen its software rolled out to the Moroccan cities of Rabat, Tangier and Tetouan.

Automation in many industries is also producing big data. Telit Communications (TCM) addresses that market by enabling machines to communicate wirelessly with each other. Arria NLG (NLG) has taken a step further – its technology can rapidly translate machine data into a written report that is indistinguishable from one drafted by a human. That helps companies “to get their arms around the data,” says finance chief Wayne Thornhill.

Since listing in December, Arria has already signed a three-year contract with Shell for use of its technology on the energy giant’s offshore platforms in the Americas. And an upgrade to its language engine that allows it to integrate visual alerts and other graphical information into written reports could drive further gains.

Big data technologies with broad appeal can be lucrative, but so can those with a singular focus. First Derivatives (FDP) controls the “avalanche” of financial data in global financial markets with its data analysis and trading software, says chief executive Brian Conlon. Australia’s securities regulator uses First’s Delta Stream product to rapidly analyse trades and quotes for evidence of insider trading or other market abuse. Similarly, NYSE Technologies, part of the New York Stock Exchange, uses First’s Delta Flow software to collect, sort and store raw data from every major global exchange. That saves market participants the costs of hiring international support teams and storing financial data on-site.

It’s easy to get lost in this fast-evolving, complex space. “Big data can get quite noisy and confusing,” says Ivan Teh, head of software analytics specialist Fusionex International (FXI). Fusionex tackles that issue with GIANT, a software package that can rapidly analyse data from several sources to deliver insight and predictions. Its key features are its simplicity and broad utility – it lets users point and click rather than code, and it works across many devices and servers. “Our vision is to simplify big data analytics and make GIANT the best choice,” Mr. Teh says.

That goal doesn’t seem unrealistic. Fusionex has secured six contracts for GIANT since launching it in December and partnered with several high-profile distributors. GIANT also contributed 40 per cent to the company’s revenue growth of £6.5m last half.


Big data is growing in importance across numerous sectors and regions. As technology advances and devices, machines and networks proliferate across the world, it will only grow more prevalent. The sheer variety of companies involved in the sector may leave investors spoilt for choice, but not all businesses are born equal. We have buy ratings on six of the featured stocks (see table), based on market dominance (EMIS), attractive valuations (Micro Focus), strong growth prospects (1Spatial), the size of their addressable market (iomart) or a mix of all of these.

Returns aren’t guaranteed, particularly in a dynamic, early-stage market. But we think the rapid growth and universal relevance of big data means the risks are outweighed by the potential rewards. Investors should go big on big data.

Big data in the USA

North America is home to some of the world’s leading big data companies. Google (US: GOOG) collects data from billions of searches daily and also owns Google Cloud Dataflow, which companies can use to rapidly analyse data stored both on-site and remotely. Systems-specialist Cisco (US: CSCO) provides the servers, networks and other hardware needed to store, share and crunch vast amounts of data. And International Business Machines (US: IBM) already earns $16bn in annual revenue from big data analytics and hopes to earn $20bn next year. Its products include Navigator on Cloud, which lets enterprises synchronise and share information across browsers, desktops and mobile devices.

Risk specialist Verisk Analytics (US: VRSK), which counts legendary investor Warren Buffett among its shareholders, is another big player. It collects and analyses billions of records to help banks, insurers, hospitals and governments combat fraud, catastrophe and weather risk. A higher-growth option is Splunk (US: SPLK), whose software can analyse and visualise machine-generated big data from websites, mobile devices and other sources. Success has seen its shares more than double since floating in early 2012. Similarly, Tableau Software (US: DATA) helps over 19,000 customers to analyse, visualise and share information. Its sales soared 86 per cent last quarter and its shares have tripled in just over a year.

10 unusual uses of big data

1. Google is poring over World Cup-related search data to reveal the concerns of fans at home. For instance, Brazilians were more interested in star striker Neymar’s new hairstyle than his penalty in the opening game, while Cameroonians were bemused by one of their players who missed the team bus.

2. California lingerie start-up True&Co is using data from customer quizzes to tailor its bras to fit better. It has increased its sales six-fold by addressing common complaints such as 'busting out'.

3., a Russian e-retailer, learned from online sales data that customers wanted more than warm clothes when snow falls and temperatures drop. Stuck indoors, people turned to books as entertainment. Now, Ozon bumps up its book recommendations when temperatures drop.

4. Swedish start-up Klarna lets online shoppers pay two weeks after their goods are shipped to remove the hassle of typing in credit card details. It combats fraudsters by using a big data algorithm that weighs more than 200 variables such as order history and time of purchase. Its next stop is the UK.

5. Disney equips theme park guests with trackable 'Magicbands' that serve as admission tickets, hotel keys and debit cards. Data from the wristbands help it work out which souvenirs to stock, what its restaurants should serve and how many princesses to have on duty.

6. US retailer Target inferred a teenage customer was pregnant by her purchases of unscented wipes and magnesium supplements. Consequently, it mailed her coupons for diapers – much to the surprise of her father.

7. Online dating site eHarmony matches users based on a database of successful couples as well as their social style, temperament and dozens of other factors. That has led to about 90 marriages a day, but only one in 100 members gets hitched.

8. Economist and oenophile Orley Ashenfelter successfully predicted the wines of the century in 1989 and 1990 by analysing past' years’ rainfall and temperature figures and studying the attributes of previous winning wines.

9. Warner Music, Universal and other music titans are always on the lookout for the next big thing. They analyse songs’ performances across radio stations, apps and music sites to determine which should be launched as singles.

10. The Wall Street Journal drew on statistics from all the countries playing in the World Cup to map out each nation’s tournament progression - if they were competing based on murder rate or per-capita Starbucks consumption.

Data downsides and privacy pitfalls

Data downsides

Perhaps the best-known example of big data is Google’s flu trends experiment. About six years ago, the search giant tracked the spread of an influenza outbreak across the US faster than the national disease authorities, without using patient or machine data. Its strategy was to map out searches for flu symptoms to paint a picture of the disease’s path.

However, when Google repeated the exercise four years later, its estimate was more than double the number of reported cases. The incident showed that big data can be unreliable. Another example is Boston’s Street Bump app, which uses the movement sensors on residents’ smartphones to report potholes to the city government. One flaw is that it pinpoints a disproportionate number of potholes in young, affluent neighbourhoods - where smartphone and app usage is highest.

These sorts of issues have fuelled dissatisfaction with big data, which some find overwhelming and too complicated. For instance, leaked documents from America’s National Security Agency include staff complaints that the spy organisation collects more data than is 'routinely useful' and is 'outpacing our ability to ingest, process and store'. Given these issues, it’s no wonder there’s burgeoning interest in 'small data', or information that can be quickly digested and acted upon.

Privacy pitfalls

America’s White House claims that big data can help cure diseases, cut crime, reduce waste and enhance corporate efficiency. But it also warns of the risks to privacy and the need for better data protection - concerns that have grown as people engage in more and more activities online. The ‘quantitative self’ trend – measuring aspects of your lifestyle such as heart rate and sleep quality and often sharing them publicly – has added fuel to the fire. And the recent rollout of new domain names such as '.market' and '.la' is making it easier for fraudsters to pose as well-known companies.

Online crime and data theft continue to be problematic. Hackers recently stole the details of over 600,000 French and Belgian customers of Domino’s Pizza, which may have included names, addresses and favourite pizza toppings. And last December, US retailer Target said cyber-criminals gained access to the credit card details of up to 40 million of its customers. Cyber-security specialist NCC Group’s (NCC) solution is its ‘.trust’ domain, an online community where it enforces a high level of security. Identity-intelligence expert GB Group’s (GBG) answer is to verify online users’ identities by checking their details against worldwide databases.

Big data players
Company nameActivityMarket Value (£m)Share Price (pence equivalent)Forward PE (NTM) Last IC View
1Spatial (AIM:SPA)Mapping software436.647Buy, 6.9p, 13 May 2014
Anite (LSE:AIE)Network and device testing2779217Hold, 93p, 2 Jul 2014
Arria NLG (AIM:NLG)Natural Language Processing5956-Hold, 64p, 12 Jun 2014
Avanti Communications (AIM:AVN)Satellites and telecoms302272-Hold, 231p, 12 Feb 2014
Blinkx (AIM:BLNX)Online video and advertising2606417Hold, 33p, 4 Jul 2014
Cisco (NasdaqGS:CSCO)Software and systems126,00014,50012Buy, $24.18, 19 May 2014
EMIS (AIM:EMIS)Healthcare software47074619Buy, 615p, 21 Mar 2014
First Derivatives (AIM:FDP)Financial trading software18593024Hold, 996p, 21 May 2014
Fusionex International (AIM:FXI)Data analytics16838545Hold, 485p, 22 May 2014
Google (NasdaqGS:GOOGL)Search and advertising387,890335,94021Buy, $557, 22 Apr 2014
International Business Machines Corporation (NYQ:IBM)Software and systems183,080106,36010n/a
iomart group (AIM:IOM)Cloud storage and hosting24222517Buy, 240p, 29 May 2014
Micro Focus International (LSE:MCRO)Software and services1,21085414Buy, 866p, 20 Jun 2014
Splunk (NasdaqGS:SPLK)Data analytics6,34030,700-n/a
Tableau (NYSE:DATA)Data visualisation4,75040,790-n/a
Telit Communications (AIM:TCM)Machine communications24421521Hold, 206p, 10 Mar 2014
Verisk Analytics (NasdaqGS:VRSK)Risk analysis10,05034,91024n/a
WANDisco (AIM:WAND)Distributed computing119519-Hold, 1,290p, 24 Mar 2014

Related topics