By Karthik Chidambaram, founder and CEO, DCKAP
There are two big reasons that investors should be paying more attention than ever to data integration. First, it’s needed inside companies to cut back on waste, increase profits, and lift share values. And second, data integration itself is a bigger market than ever, expected to more than double this decade -- and filled with investment opportunities.
To understand why this is happening, you need to start with an understanding of what data integration is, and how it works. I sometimes point to a definition from Gartner, which says “data integration comprises the practices, architectural techniques and tools for achieving the consistent access and delivery of data across the spectrum of data subject areas and data structure types.” For a simpler understanding, think of it as a solution that bridges together information from lots of different sources.
These days, with unprecedented amounts of data flowing in across different systems, integration is a huge task. Businesses need to sync data from Enterprise Resource Planning (ERP), eCommerce, Customer Relationship Management, Third-Party Logistics (3PL) tools and more.
“Most organizations struggle with a comprehensive data management design,” Gartner says in a report. It adds that the number of data and application silos inside organizations have surged in recent years, “while the number of skilled personnel on data teams has either stayed constant or even dropped. The result: The time deficit between the time the request for integrated data is raised and the time at which the request is fulfilled is now at an all-time high.”
Lost productivity and profits hit stocks
Because their data sits in separate silos, organizations often end up spending large sums of money to have teams of people copy information from one system into another. This also increases the chances of human error leading to inaccuracies in the data. Businesses also lose productivity when people have to go searching and digging for information they should have at their fingertips. All of this impacts the bottom line, and therefore stock values.
These are problems that integration platforms can solve. So it’s no surprise that businesses are investing in it. Nike is among the companies that have acquired their own data integration platforms.
I focus on data integration in a range of industries, from electrical to agricultural to hydraulics and more. I see all the time what a difference it makes. For example, imagine a customer at a big box store buying a piece of equipment. On that same day, around the world, perhaps 1,000 or 5,000 other consumers buy that same thing. When information is synced, the companies that supply those parts know instantly how many are sold and can adjust manufacturing to keep meeting demand. Companies that have all their systems aligned are much better equipped to capitalize on demand and increase sales.
We’ve all experienced what happens when systems are not synced. For example, I went to a big box store to buy a refrigerator. They did not have it in stock, and suggested I drive to another location. I asked if they could check whether the other location had it, and allow me to place the order from the location I was at. But they told me they could not engage with the other location's system. So I drove to a different retailer that was closer, and made the big purchase there instead.
Data integration is especially important in times of major disruption, as the Covid-19 pandemic showed. A study on the banking, financial services and insurance (BFSI) sector looked at empirical evidence including banking stocks. “The need for advanced data integration is growing,” it found. While incorporating such integration “might be challenging initially for BFSIs,” it may lead to “an efficient model to handle” pandemics and other unexpected circumstances.
Opportunities for investors
Given the crucial role that data integration plays in today’s business landscape, companies that offer such solutions are growing. An analysis shows big growth is likely in the coming years.
The market for data integration and integrity hit nearly $12 billion last year, and is expected to surpass $13 billion this year, according to Fortune Business Insights. It’s predicted to hit $30 billion by 2030. Savvy investors have good reason to look into stocks in the sector.
Shareholders should also look into the state of data integration at all the companies they invest in. Find out what the company is saying about this in quarterly reports or investor calls. Ask what plans lie ahead for tapping into the potential of an integration platform. The more companies hear from shareholders that they recognize the importance of data integration, the more likely those companies are to update their systems -- and the better equipped they’ll be for the modern era of business.
Karthik Chidambaram is founder and CEO of DCKAP, an integration platform provider. Connect with him on LinkedIn.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.