McKinsey Values Open Data As A $3 Trillion/yr Market

Injured Piggy Bank WIth Crutches

If you’ve been reading about governments adopting open data policies, instituting flashy portals, and launching hackathons with an air of bemused distance it may now be time to pay attention. A new article from McKinsey & Company places the market value of open data at $3 trillion per year. While that’s not quite Internet of Things money, $3 trillion is enough to add a lot more weight to your next app contest.

In October of last year, McKinsey released another report that outlines the market opportunity in detail and cites government as a critical repository and purveyor of high value datasets. “These sources of value include new or increased revenue, savings, and economic surplus that flow from the insights provided by data as diverse as census demographics, crop reports, and information on product recalls,” article authors write.

What’s critical is how the data is released, authors point to the necessity of machine readable data that can be redistributed and shared with audiences at little to no cost to them. (That means your heavily scrubbed year-old budget PDF released to your municipal or state open data portal isn’t going to cut it.) Instead, the government has four ways to provide value – being a data provider, data engagement catalyst, as a super user, and as a policy maker.

While these areas may seem self explanatory, few governments have really opted to dive in on open data and put it to work. Much of the effort has focused on gimmicky hackathons, app challenges, or one-off summits that put a bunch of geeks in a room to eat free pizza and “raise awareness.” The article notes that for governments who opt to not only release valuable data, but reap the rewards of using data driven decision making, they can help foster longer term innovation, budget savings and streamlined service delivery.

CivSource reported yesterday on the moves by Boston Councilor Michelle Wu to build out that city’s open data effort with a coordinator and governance policies something the McKinsey authors say has to happen for open data to work. “While the benefits of open data are significant, the success of open-data programs is not guaranteed. For government to serve as an open-data provider, catalyst, user, and policy maker in an effective and sustainable way, it needs to have the right people, tools, and systems in place,” the article notes. Other cities like Pittsburg, have newly minted open data coordinators, or have added the mandate to the CTO portfolio.

The phase 2 question on open data is what happens next. Philadelphia technology officials have opted to test a model where the data is free, but the apps are backed by for-profit stickier companies over philanthropic efforts. Officials there hope this will move open data-driven civic tech from novelty to something more mainstream and economically viable. Article authors say government should also encourage datasets from private companies be made available to the public and by extension the developer community, to bring more value and depth to open data efforts. Procurement too needs to catch up to subscription based SaaS offerings common to enterprise data-driven tech. For governments sitting on the sidelines when it comes to open data, it’s hard to find a reason why $3 trillion per year isn’t enough to get going. Watch this space.