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Data & Analytics

04:09 PM
Rick Whiting, InformationWeek
Rick Whiting, InformationWeek
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Data Demands Respect

Acxiom has quietly made a billion-dollar business out of handling data for companies including Bank of America, JPMorgan Chase and MBNA America.

Acxiom Corp. has always been good at managing data. Lots of data. By its own estimate, Acxiom manages more than 20 billion customer and prospect records.

"We do three things really well," says Alex Dietz, who's referred to internally as "products and infrastructure technology leader" and functions as Acxiom's CIO (there are no traditional titles in the company). Those three things, Dietz says, are managing large volumes of data; cleaning, transforming, and enhancing that data; and distilling business intelligence from the data to drive smart decisions. That data is used by Acxiom's approximately 1,000 clients for everything from developing telemarketing lists and identifying prospects for credit-card offers to screening prospective employees and detecting fraudulent financial transactions.

Nestled in the hills of central Arkansas, in and around Little Rock, an area still associated with names like Clinton, Whitewater, and the Rose law firm, Acxiom keeps a low profile but carries a lot of weight. Earlier this year, the company entered the billion-dollar club, recording $1.01 billion in revenue for its fiscal year ended March 31. Its list of blue-chip customers includes financial-service companies such as Bank of America, J.P. Morgan Chase, and MBNA America; retailers Sears and Federated Department Stores; and consumer packaged-goods makers such as Philip Morris.

But data collection comes with its own risks. Last year, Acxiom drew the ire of privacy advocates when it provided consumer demographic data to a little-known military contractor that was using passenger lists from JetBlue Airways Corp. to develop anti-terrorism software for the military. And earlier this year, Acxiom found itself in the spotlight when federal prosecutors indicted the head of a spam marketing company for allegedly hacking into Acxiom's system and stealing 8.2 Gbytes of personal, financial, and company data valued at more than $7 million.

Acxiom isn't the only company wrestling with the tough issues presented by consumer data: finding new ways to manage and extract value from increasing volumes of data, protecting that data against external and internal threats, and doing it in an increasingly privacy-conscious society. So how it's attempting to meet those challenges provides valuable lessons for other companies. "What we're really talking about is how information is used for the benefit of the consumer," says "company leader," or CEO, Charles Morgan. "We have to show consumers that they're realizing value from our use of their information and our clients' use of that information," he says, describing Acxiom's business model. "We need happy consumers for our customers to be successful." Acxiom's challenge: to ensure the mutual compatibility of that dynamic.

No one at Acxiom seems to know exactly how much data the company manages in its 11 tightly guarded data centers. The company's central data center is located north of Little Rock, in Conway, Ark., where Acxiom was founded in 1969 as a spin-off of a local bus manufacturer. Acxiom also has data centers in Downer's Grove, Ill., outside of Chicago, and as far away as Sunderland in the United Kingdom. The company recently opened a data center in Phoenix, and an additional facility is under construction in West Little Rock. The best estimates are that the Conway systems alone store between 1.5 and 2.0 petabytes of data, or up to 2,000 terabytes.

A portion of that data makes up Acxiom's information products, such as its InfoBase database of consumer data and its Personicx list of U.S. households segmented into 70 categories. Acxiom clients use those offerings to build marketing prospect lists, check the accuracy of names and phone numbers in their customer databases, and add demographic details or verify personnel data. Acxiom continues to add to its portfolio: In August, it debuted Personicx LifeChanges, a system that tracks U.S. households through life stages such as marriage or the purchase of a home. Those and other data products account for just over a fifth of Acxiom's revenue.

To build its data library, Acxiom collects information from a wide range of public and private sources. The company has property-deed-registration information from 930 counties across the United States, as well as 3,500 telephone directories. It also purchases data from private sources, such as catalog and magazine subscriber lists and research from consumer surveys. But a lot of the data Acxiom manages belongs to other companies. More than half of its revenue is generated by data-related services, such as building and hosting data warehouses, integrating and cleaning customer data, running customer-relationship-management applications, developing customer marketing lists, and analyzing data or providing clients with the means to analyze it themselves. Clients typically store three years of complete customer-history data with Acxiom, CEO Morgan says, but that's expanding to five years of data. "We like to think that these customers look at the Acxiom data center as an extension of their own data centers," he says.

Citizens Bank in Providence, R.I., hired Acxiom to manage its customer data, processing it on a daily basis to confirm and correct names, addresses, phone numbers, and birthdays, and remove duplicate names created when customers use multiple Citizens services. "Customers today have complex relationships with the bank--it's not just a checking or savings account," CIO Bill Wray said in an interview earlier this year, when connections between the bank's customer database and Acxiom's IT systems were being built.

Acxiom isn't satisfied with just managing other companies' data; it wants to manage their data centers as well. Last month, Acxiom signed one of its most significant IT outsourcing deals, with Information Resources Inc., which collects and sells terabytes of retail point-of-sale and consumer spending data. Under a contract potentially worth hundreds of millions of dollars, Acxiom will run IRI's data-center operations and build a real-time content delivery system for the company.

Outsourcing isn't a new venture for Acxiom. Its first data-center-services customer was Norman Vincent Peale's Guideposts organization some 15 years ago. Acxiom's outsourcing division was created officially in 1998 following its acquisition of May & Speh Inc., an information-management services provider. Outsourcing deals now account for a quarter of the company's sales.

Acxiom sees outsourcing as a growth area, targeting companies in data-intensive industries such as consumer packaged goods, financial services, and retail, where its data-management expertise and technology give it an edge over IT-services stalwarts such as IBM and EDS, says Lee Hodges, chief operations leader. Acxiom holds up the IRI deal as emblematic of the company's outsourcing strategy. IRI collects huge amounts of product-sales data from supermarkets, pharmacies, and other retailers, as well as from 70,000 volunteer households, and sells it to packaged-goods manufacturers. As part of the deal, worth $25 million to $30 million a year for up to 15 years, Acxiom is developing a content-on-demand system to process retail data in near-real time, combine it with demographic data, and sell it to IRI's clients to identify and exploit consumer buying trends as quickly as possible. IRI and Acxiom are developing applications, due in February, that will help retailers and manufacturers manage new product introductions, analyze price and promotion effectiveness, and track products that are out of stock.

Key to the IRI deal is Acxiom's grid-computing technology, known as the Customer Information Infrastructure, which accounts for about 10% of Acxiom's overall IT resources (see story below). IRI was swayed by the grid strategy because it offers lower processing costs than mainframes or big multiprocessor servers and yet will allow IRI to get new information products to market faster. Despite operating two Hewlett-Packard Superdome servers in its own data center, IRI lacked the processing power and the expertise to turn huge volumes of data into useful business intelligence, says Marshall Gibbs, the company's chief technology officer. "Acxiom has the domain expertise, and we saw grid computing as the answer to the muscle problem," he says. Acxiom takes that as validation of its grid strategy. "We had a better mousetrap and a cheaper mousetrap," boasts chief operations leader Hodges.

Acxiom is looking to integrate--and thereby better leverage--the data products, services, and IT outsourcing facets of its business, which in the past operated mostly autonomously. "We're trying to get away from the idea of different divisions selling data and services," CEO Morgan says. "That's our strategy, to create an integrated-services value proposition."

In April, Acxiom reorganized around a shared-resources approach to serving its customers. While sales and client-management staff remain dedicated to specific clients, IT resources--database programmers, for example--are pooled and deployed wherever needed. Acxiom says its grid technology helps make that possible. The reorganization allowed Acxiom to trim its workforce by 5.4%, or about 230 employees. But its business strategy isn't what has garnered publicity for Acxiom. The company's involvement in situations that raise privacy implications has served to remind everyone that Acxiom's business, at its core, is collecting and selling data about people.

In September of last year, a controversy erupted over JetBlue turning over customer data to the federal government. A year earlier, the airline had provided data on 1.5 million passengers to Torch Concepts Inc., a military contractor developing a system for screening visitors to military bases. JetBlue and Torch Concepts were both Acxiom clients, and Acxiom provided the military contractor with demographic data and Social Security numbers to use with the passenger list provided by the airline.

The case has drawn Acxiom into the debate over when it's appropriate for companies to supply customer data to government agencies. Acxiom does provide data to government agencies, acknowledges the company's "privacy leader" Jennifer Barrett, though she declines to offer specifics. The company also provides privacy-consulting services to the government, Barrett says, pointing out that the government's privacy efforts and policies lag the private sector by about 10 years. "So when government agencies ask companies for data, they often haven't thought about these issues the way Acxiom has," she says. Still, government contracts account for less than 1% of the company's revenue.

Acxiom considers privacy a core competency, and providing clients with privacy-consulting services is a lucrative part of its business. It was among the first companies to create a chief privacy officer post and has nine full-time employees devoted to privacy issues, along with dedicated resources in each country where Acxiom does business. Also, Acxiom is working with several members of Congress to help shape a national privacy policy, says the company's "legal leader," Jerry Jones.

Privacy's twin brother is security, and Acxiom is working hard on that, too. The company created a security chief post in late 2003 and named Frank Caserta, a senior technical adviser in the database and data warehouse group, to the position. His job is to make sure Acxiom has a centralized, strategic view of data security and to champion best data-security practices within Acxiom and among its clients, Caserta says.

Some clients have sent teams to investigate Acxiom's data-security practices, and Caserta's first six months on the job were devoted to those audits. Since April, he has focused on corporate governance issues, studying how Acxiom identifies and mitigates security risks. He also has been meeting with his counterparts at client companies and adopting their best practices, such as using a third-party company to test Acxiom's IT-security perimeter twice a year. "Things are tighter and better, but there's always room for improvement," he says.

And room for growth. An increasingly security-conscious world is opening up new opportunities for Acxiom to provide data in areas such as employee background checks, compliance with regulations like the USA Patriot Act and the Do Not Call Registry, and fraud detection. In February, credit-data provider and Acxiom customer TransUnion LLC and Acxiom introduced a system for fraud prevention and regulatory compliance for financial-services, insurance, and telecommunications companies.

Two important growth opportunities are acquisition and global expansion. Acxiom served both imperatives earlier this year by acquiring Consodata S.A., a European consumer-database marketer, for $36.4 million; late last year, Acxiom acquired Claritas Europe, a data marketer based in Haarlem, the Netherlands, for approximately $40 million. Together, they will make up Acxiom's base of European operations.

Acxiom may have even more ambitious globalization plans. Having just returned from a lengthy trip through Asia, CEO Morgan says information systems for checking customer credit are woefully underdeveloped in China, where consumers can wait months to get approval for car loans. "You can imagine the fees," he says. "And you wouldn't believe the paperwork."

Sidebar: True Grid: Acxiom Outgrows Symmetric Multiprocessing

Sidebar: Acxiom's Cult Of Personality: Charles Morgan, Company Leader

Sidebar: Acxiom Privacy Leader Jennifer Barrett: A Few Questions

Sidebar: Taking Aim At Acxiom

This article originally appeared in InformationWeek, Oct. 25, 2004

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