Sydney partner Nick Abrahams discusses how deals are showing data analytics is the place to be. The following article was originally published by The Australian Financial Review and is reproduced with permission.

Deals show data analytics is the place to be as, data scientists rule the roost

A middle-aged neighbour in the 1967 film The Graduate tells an aimless college grad Dustin Hoffman that a viable future career would be in "One word: plastics". If the film was made today the line would be changed to "Two words: data analytics".

There has been a rash of reports released over the last year on the future of work. These predict dire consequences for most occupations except for being a "data scientist".

Can I firstly congratulate the actuaries on one of the most successful professional makeovers ever pulled off. Ten years ago, being an actuary was not considered the most glamorous of careers, but now data science is hot and fresh graduates achieve starting salaries in the $100K+ range.

I understand that actuaries are different in some respects to data scientists, but there are broad similarities in that they both focus deeply on analysing data.

The Economist says "data is the new oil" and UBS predicts that Australian stocks that are tapped into data analytics will be the big winners in the next decade.

We can see the impact of data analytics everywhere. MLC was the first Australian insurer to use smart-watch technology to track customers' heart rate, sleep pattern and physical activity and reward them for good behaviour.

Qantas and GE have just announced an app which allows a pilot to track their individual flight performance data for the purposes of improving operational efficiency.

Working with data

The reality is in the future most of us are going to need to work with data augmented by the machines. Understanding data will not just be the province of the data scientists.

Like the Qantas pilots, we will all have to understand how to use data in our jobs. Although our skills will not need to be at the level of the scientist, as there are already platforms which provide data science via an easy-to-use service.

Below is a summary of the corporate activity in Australia in recent years around data analytics or, as it used to be called just a few months ago, big data.

We know that the established US players like IBM, Cloudera and Amazon have been working hard on growing their Australian presence, but recently there has been an influx of the newer offshore players like US unicorns Palantir and Qualtrics, as well as Indian company Ugam building up their capabilities over here.

As for Australia's home-grown players, our data scientists have been in demand from companies eager to buy in talent.

Big retailers such as Wesfarmers, Myer, JB Hi-Fi and Super Retail Group, fearing the impact of Amazon's impending arrival, have said their customer analytics capabilities represent a key defence for them.

Woolworths got a first-mover advantage in 2013 when it bought 50 per cent of big-data pioneer Quantium for $20 million. This has been a great investment, not only because of the increased customer insights Quantium has brought to Woolies, but also financially as the stake is likely now worth more than $200 million.

Chief executive Brad Banducci has said the sale of non-core assets is a possible consideration and there would be a long list of suitors for the Quantium shareholding.

Sydney startup Skyfii backdoor-listed on the ASX at the end of 2014. The company provides insights by analysing Wi-Fi use in the common areas of Westfield and Mirvac malls. It can also set up a communication channel between retailers and the shopper via the shopper's phone.

In May this year Woolies signed a three-year deal for Skyfii to be fed information from the 600-plus stores in their portfolio.

On-field sports analytics has proven to be an area of strength in this part of the world. In 2015 NZ-originated SportsTec was sold to US company Hudl. In that same year, Catapult, a graduate of a government Cooperative Research Centre, listed on the ASX.

In mid-2016 Catapult bought XOS Technologies and PlayerTek for a combined $84 million. Other Australian players to look out for in this space are Fusion Sport, Brooklyn Dynamics and Champion Data.

The airline loyalty programmes understandably value data. In 2015 Qantas Loyalty bought a controlling stake in analytics business Taylor Fry. Virgin's loyalty business, Velocity, hit back a few months later, buying Torque Data.

The energy sector has seen activity. A year ago Solar Analytics raised $4 million from AGL Energy and a consortium of high net worths. It allows homeowners to track their energy production and usage in real time. Other data players in the energy space include Reposit Power and Redback Technologies.

There have also been been numerous successful analytics platforms developed in Australia which help to make data insights more accessible.

In May 2016 Data Republic closed a $10 million funding round with Westpac's Reinventure fund, NAB Ventures and Qantas Loyalty.

Westpac also announced it was creating a data accelerator to help build new technology businesses from the anonymised data sets within the Data Republic platform.

Done deals

2017 has been particularly busy for investments in platform plays:

  • Sequoia China led a $16 million round into virtual data scientist platform, Hyper Anna.
  • Square Peg Capital put $4 million into collaborative analytics platform, Vero.
  • Fulcrum, a solution that automates the "next best interaction" with the customer, closed a $3.4 million raise.
  • Customer intelligence startup Local Measure (the pivot of the old Roamz app) raised $4.5 million, taking its total funds raised so far to $15 million.

2017 has also been busy for full sell-downs of analytics businesses:

  • Melbourne-based data analytics tools provider Space-Time Research was bought by Japan's leading provider of business intelligence software, WingArc1st.
  • Sydney-based ASX-listed analytics firm Invigor bought ASX-listed Singapore e-commerce analytics startup Sprooki for $10 million.

Other Australian players to watch in the data space include Contexti, EngineRoom.io and Yellowfin.

Whose data is it?

There are regulatory changes on the horizon which are giving the user more rights, with respect to how their data is exploited. Earlier this year the Productivity Commission issued its Data Availability and Use report, making a number of far-reaching recommendations to give users more rights with respect to their data.

The aim is to have legislation in place by the end of 2018.

There are also regulatory ripples overseas, such as the UK's "open banking" reforms due to take effect in 2018. These reforms will make it clear that transaction and loan repayment data belongs to the customer not the bank and that the banks need to allow third parties to access this data via application programming interfaces (APIs).

But in some instances, the regulations have gone the other way.

The Chinese government's social credit system gathers information in relation to a person's online and offline activities and then penalises them for poor behaviour. Chinese officials say the system will "allow the trustworthy to roam everywhere under heaven while making it hard for the discredited to take a single step".

As if to punctuate this, in February this year it was reported that China has banned almost 7 million people from taking flights and high-speed trains as a penalty for not repaying their debts.

Like it or not, data is the future and you better get on board the train.