Enter the data warehouse. As the name implies, it's a big box filled with digital information. But it's a smart box, optimized to concurrently store and analyze billions of bits of information.
For Market Insights the leap from CD-ROM jukebox to data warehouse was the equivalent of converting their data housing from a pup tent into the Taj Mahal. At the most rudimentary level, the elements of a data warehouse--roomy information storage combined with some analytical capabilities--can be assembled using standard relational-database products. A beginner's data warehouse can be had for less than $100,000, built from Microsoft products like an Access database, an SQL Server, and a Windows NT operating system. Spend two and a half times that and you can get more storage and greater analytical power: an Oracle database and a data-access tool from a well-known maker like Business Objects or Cognos.
To Milano, who handles operations and technology for Market Insights, the rudimentary setups were no match for the vast reservoirs of data that his company processed. He was certain that only a highly specialized data warehouse could fill its needs. The decision, though, wasn't his alone to make. Louie and Milano have always worked as a team. "I've still got to convince my better half of the promise of something like this," he recalls thinking. When the more cautious Louie balked at such a large capital expense for technology, the idea was shelved--until a year later, when Marc Bandt called with his proposal.
With a handshake, Louie, Milano, and Bandt entered into a deal. "I was looking for a company that had a large client base to sell into," says Bandt. "I thought there was a tremendous opportunity to leverage the core analytical set." Louie and Milano, too, saw the data warehouse acting as a springboard for new products and services. They had no market research in hand, just hunches on how information use would blossom.
For starters, they planned to load much of the health-care information they had collected into the data warehouse's roomy quarters and then sell Web-based access to it. (They eventually dubbed this service Agent 24-7.) It seemed a natural way to offer more to current clients as well as to attract new ones. Even today, good old-fashioned paper reports generate 60% of the company's revenues. Fifteen percent of that comes from spiffing up and reselling raw data--that is, reformatting and presenting it in a ready-to-crunch manner--from some of the 50 public databases Market Insights purchases every year. (A typical buyer might be a medical-device manufacturer that wants to sift through the data to prospect for new customers.) Desktop software applications, the company's other product line, were launched about two years ago. Financial Compass, to name one example, lets a hospital's chief financial officer call up current cost reports from 6,000 U.S. hospitals in a spreadsheet and calculate performance benchmarks for his or her own facility based on expenses, debt-equity ratios, liquidity, and so on. With the warehouse, Market Insights could offer clients something different: a kind of drive-through data service. Instead of paying for an in-depth report or a massive database, customers could grab some quick information and limited analysis.
The trio also came up with plenty of other ideas for putting the data warehouse to use. For a subscriber fee, hospitals and caregivers might stash their own facilities' data in Market Insights' warehouse. Then they could compare their own stats with other providers'. Maybe they would pick through the data to understand which pneumonia treatments had the best and most cost-efficient outcomes. Even the analysts at Market Insights would benefit, by hooking in and generating information more quickly.
As for how the data warehouse would get built, Market Insights had always been a technology self-starter. The company employed just one full-time software developer, but Louie and Milano say Bandt advised them that Agent 24-7 could be built with Market Insights' existing staff. (Bandt himself recalls telling them that it could be built with existing staff or they could easily hire someone with the technical capabilities, since they were in San Francisco.) "We had assurances from Marc that it could be done based on what he would contribute and considering myself and Nino [Milano] as resources as well," Louie recalls. "That's been the critical success factor of Market Insights in the past: where it takes most companies x number of employees to get the job done, we prided ourselves on doing it with many fewer, because we were smarter."
They agreed that Market Insights would pay Bandt a modest salary and foot the bill for the equipment. In exchange, once the system was up and running and had reached several milestones, Bandt would take an equity position in the company. Bandt says he was clear from the start about his reasons for working at a drastically reduced salary. "I was willing to work for them to prove to them that I was an equal in their circle," he says. Then, after acquiring his equity stake, he was counting on its becoming more valuable, either through the sale of the company, an initial public offering, or even simple growth. That would produce a financial windfall for him as part owner. "I was looking for personal wealth," he says bluntly.
