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This week I had the opportunity to meet Mark Smith, the CEO of miEdge, a new subscription-based data service for insurance brokers selling group benefits to U.S. companies. miEdge uses algorithms to index and scrub publicly available data filed with the U.S. Department of Labor to identify and quantify sales prospects. Mark demonstrated for example how easily his product can identify sales leads from among all of the corporations in a given geographic area who are paying above-market commissions to their existing benefits broker.
Peter Borans runs a similar business, Advanced Medical Strategies, which has produced several subscription databases that make it possible for self-insured companies, reinsurance underwriters, and third party administrators to control and significantly reduce healthcare costs by providing their subscribers with up-to-date information on prescription drug costs as well as what procedures and tests are appropriate for a given diagnosis, as well as how much medicare and private insurance companies are paying for various treatments – broken down by state, hospital, and even by health care plan.
Talk about BIG DATA!
An unprecedented number of regulatory filings have now been processed electronically for a period of years, making it possible for entrepreneurs to access and analyze that data and identify actionable anomalies – such as who is paying too much for services, or which publicly-traded apparel companies have high revenue growth but low price-to-earnings ratios.
Thomson Reuters Corporation has already acquired a dozen or more of these innovative businesses in the past four years, and more than 20 others have been acquired by other major players including Summit Business Media, Morningstar, Standard & Poor’s, and LexisNexis (which is a subsidiary of Reed Elsivier).
Here are five reasons why these subscription-based data services are highly sought after:
- Recurring Revenue Streams: 20 years ago, when I needed to research prospective buyers for a client, I relied on a number of subscriptions to print publications and searchable data published on CD-ROM. Today, everyone in my business subscribes to an online database – of which there are several options including CapitalIQ (owned by S&P), Factset, and Pitchbook – but regardless of which we choose, they each cost several thousand dollars per month. Every month. Forever.
- Better Tools: The analytics available today are truly astounding, as the robust nature of the data and the software make it possible to build myriad dashboards that provide real-time actionable information.
- Ubiquity: Instead of going to the library or waiting for the information to come by mail, today the information is available from any web browser, and increasingly it is available on mobile devices.
- Application Interfaces: Most services make it possible to download information into a spreadsheet, and many have real-time connectivity so that information and presentations can be updated with the push of a button.
- Reduced labor costs: 20 years ago it would take an analyst (or sometimes two) with an MBA an entire week to research and scrub a comprehensive buyer list for my business, and even then, the list would include dozens of companies that no longer exist – or which had themselves been acquired already. Today, one good analyst can do the same work in a few hours, and with fewer mistakes.
Subscription-based services aren’t the wave of the future – they are the current state of the art, and the major information service companies (formerly known as “publishers”) are eager to expand their reach.
(Disclosure Note: Jamie Grant serves on the board of advisors to Advanced Medical Strategies).