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Sunday, January 15, 2006

Enterprise Analytics

This report on the booming prospects of BI software segment makes interesting reading,while we also see this happeningcovered earlier here. Last week came across Tom Davenport's recent article in HBR titled competing on analytics. BAM, BI, CEP, analytics: whatever it might be – it is clearly making waves. We are seeing that industry after industry is beginning to heavily invest in enterprise data analytics.At a time when firms in many industries offer similar products and use comparable technologies, business processes are among the last remaining points of differentiation. And analytics competitors wring every last drop of value from those processes. Some companies have built their very businesses on their ability to collect, analyze, and act on data. Bringing out a relationship between heavy duty analytics users and market leadership, he concludes that business trying to reach leadership position need to invest in enterprise wide analytic initiatives. These "analytics heavy competitors" in general have top management sold out to the concept of analytics as a strategic differentiator, have several analytics initiatives going on, for ears together & pursue these at the enterprise rather than departmental level. He dismisses the use of the term "business intelligence" as being "the term IT people use for analytics and reporting processes and software".

He relates the success of analytics users like Amazon, Harrah’s, Capital One, and the Boston Red Sox to that of well known killer app beneficiaries such as AA( with SABRE), Otis ( with predictive maintenance) etc. Like other companies, they know what products their customers want, but they also know what prices those customers will pay, how many items each will buy in a lifetime, and what triggers will make people buy more. Like other companies, they know compensation costs and turnover rates, but they can also calculate how much personnel contribute to or detract from the bottom line etc and how analytics competitors do all those things in a coordinated way, as part of an overarching strategy championed by top leadership and pushed down to decision makers at every level.Pointing out that with such widespread use of modeling and optimization, any company can generate simple descriptive statistics about aspects of its business - average revenue per employee, for example, or average order size. Analytics competitors look well beyond basic statistics and use predictive modeling to identify the most profitable customers - plus those with the greatest profit potential and the ones most likely to cancel their accounts. They pool data generated in-house and data acquired from outside sources (which they analyze more deeply than do their less statistically savvy competitors) for a comprehensive understanding of their customers. Analytics competitors are more than simple number-crunching factories.

While competing on analytics means competing on technology, these forward looking organizations apply technology—with a mixture of brute force and finesse—to multiple business problems. But they also direct their energies toward finding the right focus, building the right culture, and hiring the right people to make optimal use of the data they constantly churn. In the end, concludes Tom very rightly so, that people and strategy, as much as information technology, give such organizations strength. Most companies in most industries have excellent reasons to pursue strategies shaped by analytics.

It is not without reason that I earlier wrote, "watch out for some consolidation in this space". Microsoft is hardly alone in eyeing this sector.Oracle recently described Siebel’s analytics as hidden jewel. Cognos, Business Objects may look attractive to enterprise majors.SAS may be the only major left untouched. Microsoft could also make some acquisitive moves besides SAP & Oracle. Oracle used its recent Oracle Open World conference to outline analytics as a key focus going forward. While there is a near consensus about the imminent consolidation in this space, the barriers could be self made – oracle looking at smaller acquisitions moving forward( they may be content with siebel analytics. As the analytics industry is a mega segment and a fast growing one at that( repeated surveys show this as a high priority spend area for enterprises), and a very important technology that could be used for competitive differentiation by business - the four majors may still make aggressive moves.

Category :, Emerging Technologies,
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Sadagopan's Weblog on Emerging Technologies, Trends,Thoughts, Ideas & Cyberworld
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