Insights / Blog Three Things You Need to Know About Data Exchanges April 1, 2021 Summary: What are the different types of data exchanges? There are four different types of data exchanges: peer-to-peer data exchange, private data exchange, data marketplace, ‘collaborative data exchange.’ Learn more about each of these below. ______________________________________________________________________________ Interest in data exchanges is skyrocketing: in the next year, 35% of large organizations will be either sellers or buyers of data via formal online data exchanges, up 10% from last year. In fact, data exchanges are emerging as a key driver of the data economy. So what’s all the buzz about? Why would a company want or need an exchange? How do they benefit organizations? In this two-part series, we’ll take a deep dive into the basics and details. Data Exchange Defined For starters, let’s be clear about what a data exchange is. At its core, data exchange is a digital platform that eliminates the friction from finding, acquiring, and integrating data, making it easy for any company to monetize its data assets and create new revenue streams. The ‘exchange’ can either be one-way or mutual to drive joint value propositions. Some data exchanges are very basic, while others offer deeper functionality. Types of Data Exchanges Many companies are in the data exchange business, and new ones are cropping up every day. They all primarily use FTP servers, APIs, and various cloud sharing mechanisms to facilitate data transfer and fall into one of these four general categories. 1. Peer-to-Peer Data Exchange. This type of exchange facilitates direct data sharing between two companies that want to share data on an ad hoc basis. They can also enable data sharing between two or more divisions in the same company. For instance, a large hospital with two data warehouses, one for business operations and one for research, might use a peer-to-peer exchange to share subsets of data. 2. Private Data Exchange. These tend to focus on a single industry, functional area, or type of data. Here are three examples: An industry consortium may collect and standardize data and distribute it to participating members. A large retailer may want to share inventory data with its suppliers and collect shipment data in return. A service provider, such as an ad-tech firm, might use a private data exchange to distribute account activity to individual customers. 3. Data Marketplace. A data marketplace is a public data exchange open to any company that wants to supply or consume data. Some marketplaces are global in scope, spanning every industry, function, and type of data. But there are also niche data marketplaces that focus on a single sector. The difference between a data marketplace and data marketplaces is that a ‘data marketplace’ is used to describe a place for buying and selling third-party data, whereas ‘data marketplaces’ facilitate the external exchange of data via a financial transaction. 4. ‘Collaborative Data Exchange.’ This model combines a data exchange and collaborative functionality, such as a secure sandbox. The core purpose is to enable a low-risk, iterative approach to exchanging and collaborating on data within and between organizations, and can also be a data mesh. Why invest in a data exchange? There are many reasons that data exchanges are gaining traction in the market. At its core, they offer the same value proposition of leading consumer marketplaces like Amazon, Spotify, Apple iTunes, and other leaders that address the four C’s: convenience, cost, completeness, and community. (Note: every type of data exchange described will offer all of these benefits, but these are the general advantages of data exchange models.) Eliminate the middleman in the data value chain, whether it’s from a data lake, data warehouse, or any other sourceConvert any digital content, including data, models, and code, into consumable information and package it to be easily found, understood, and used effectivelyAllow non-technical users to quickly get the data they need without coding or advanced training, increasing levels of data literacy and culture in organizationsSecurely share data internally and externally with suppliers, partners, and customers, while you securely manage the data as a valuable assetMeasure the value of data to understand who and how the data is being used, and collect direct feedback to continuously improve data productsBreak the cycle of one-off processes by enabling new, blended, or refined data products that scale value across the organization and accelerate business outcomes Manage data more easily since data products can be easily updated, and those changes are automatically pushed out to all subscribers of that product.Enable collaboration between data domain experts and business stakeholders, as well as vendors, suppliers, partners, and customers, to build trust and fast-tracks outcome Interested in learning more? Find out more in the second part of this series, where we’ll take a closer look at the standard and value-added features of data exchanges, associated technologies that pair with exchanges, and current challenges.If you’re eager to learn more now, download The Eckerson Group Report: Rise of the Data Exchange.