Algorithmic IP Tied to Market
February 9, 2017
2021, the prevalence of equity analysts valuing organizations'
information portfolios in valuing businesses themselves will spark
formal internal information valuation and auditing practices.
In a report containing a series of predictions about the rising
importance of data and analytics, Gartner analysts said that although
information arguably meets the formal criteria of a business asset,
present-day accounting practices disallow organizations from
capitalizing it. That is, the value of an organization's information
generally cannot be found anywhere on the balance sheet.
"Even as we are in the midst of the information age, information simply
is not valued by those in the valuation business," said Douglas Laney,
vice president and distinguished analyst at Gartner. "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"
behavior — 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," Mr. 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
CDOs to begin optimizing the collection, generation, management and
monetization 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
Algorithm patents can be granted in the U.S., 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 (named a Gartner Cool Vendor
in 2016), 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.
the top 40 organizations 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,'" said Mr. Laney. "But algorithms
can make a great deal of difference. The list of important algorithms is
endless. To name just a few: Google's PageRank algorithm, mp3,
blockchain and backpropagation in deep learning."
Gartner recommends that 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.