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How Much Is Your Data Worth? FileSlinger™ Backup Reminder 08-31-07

August 31, 2007 by Sallie Goetsch Leave a Comment

Last week the VP of Marketing at Data Risk Management contacted me in response to the backup reminder I wrote nearly two years ago about backups and insurance. My conclusion at that time was “It’s possible to get insured against the cost of losing your data, but you’re only going to be insured in the amount it would cost you to restore your data if you had up-to-date backups. If your business is out of operation for weeks or your client data is permanently lost because you have no backups, you’re out of luck.”

What the marketing VP said to me was that his company was “facilitating the data insurance market in a profound way.” I’m still not entirely sure what that means, but I took a look at the website, and what they’re offering is interesting.

I was expecting data insurance the way I’d always thought of it: you pay premiums and get money if you suffer from catastrophic data loss. This is something different.

Their website explains it like this:

Insurance companies can’t insure the value of your data because data loss is difficult to prove and there would be a high rate of fraudulent claims. Data Storage companies do not have the technology to safely guarantee the value of your data. If they lose your data—they might refund a few months of your storage fees.

So what’s their alternative?

We store your data in the safest, most cost effective way possible. If we can’t give you your data—you get a check for its full value.

And who determines that value? You do, and that’s what your “premiums” are based on.

This is the tricky part. How much is your data worth? If you purchased a mailing list (a practice I advise against, but for the sake of example), then the list might be worth what you paid for it, assuming you could get the same list again from the same source. Alternately, it might be worth what it has brought you in product sales.

As for data you create, the most prudent thing might be to set its value at what it would cost to re-create it. If a client paid you $X to develop a program, write a white paper, or whatever, then you might set its value at that amount. You might need to double that amount, however, or add to it the income you would lose while re-creating it.

There’s going to be some data it’s not possible to reconstruct, for one reason or another. How do you value that? “Sentimental value” is an expression used to refer to items that most people wouldn’t pay money for, but things with sentimental value are often irreplaceable. No amount of money can bring back your late grandparents or return your child to an earlier age to pose for a photograph. Does that mean you insure your personal items for more money, or not at all? Would money compensate you for the loss?

“Many companies value 100 MB of data at over 1 million dollars,” the site claims. All I can say is that either I have the wrong kind of data, or I’m not charging enough, because I can’t think of any 100 MB of data I have that cost me and my clients that much to create, or that it would cost me that much in lost income to re-create—though there could certainly be some fairly severe implications for the future of my business if I had to drop everything to re-create something I’d lost.

Let’s take, for example, my Outlook .pst file, where I store e-mail, contact information, and appointments. Those are all important things, which is why I back that file up frequently. I’d certainly be in trouble if I lost it all. At a million dollars per 100 MB, it would have a value of almost $6 million. Since Data Risk Management charges 10 cents per thousand dollars of value per month, that would be $600/month. I suppose that if my Outlook data were really worth $6 million, it might be worth it.

Let’s look at a more realistic scenario. The minimum value allowed for data is $100 per megabyte, which would put the total value of my Outlook data at about $60,000, which would be sufficient to cover the cost of reconstructing that data from other sources, or at least enough of it to deal with the present and the future. The cost of coverage would then drop to $6/month, which is certainly within range for small and home-based businesses.

The interesting thing about Data Risk management is the way they combine data storage with insurance. By storing your data in multiple secure data centers, they reduce their likelihood of having to pay out on a claim. And by charging $1 per gigabyte for data retrieval, they help to ensure themselves enough funds to pay out if they have to. And you want a company like this to have a sustainable business model, because the biggest risk of putting your data into a startup like this is that they won’t be around this time next year.

Technorati Tags: Data Risk Management, data insurance

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