Corporate data is only as useful as the information you can extract from it.
When business-analytics projects work, the success stories can be dramatic. Witness the results posted by the Dreyfus Corp., which manages $165 billion in mutual fund assets. Looking for a way to lower churn and draw more business from current customers, the company rolled out CRM and analytics software from SAS Institute in the late 1990s and pored through the data.
It found several red flags. Sudden increases or decreases in a customer’s contact with Dreyfus. More transactions between a customer’s funds. Soon Dreyfus had a model it could use to proactively seek out potentially restless customers and target them with tailored sales calls. The company watched its investment redemption rate drop from more than 20% annually to as low as 7%, while its overall customer attrition fell nearly 50%.
Such tales are driving interest in analytics software, a broad field IDC estimates grew 12% in 2004, to $15.1 billion worldwide. It shares a fuzzy border with the even broader market for business intelligence (BI) software, an umbrella term encompassing products that range from technical tools for storing and modeling data to high-level applications that present corporate data in user-friendly formats, such as scorecards and dashboards.
BI for the masses is a trend industry analysts have talked about for years with growing fervor and conviction. As companies become savvier at using enterprise applications such as CRM, the pool of data available for analysis grows larger and more detailed. Regulatory changes such as the Sarbanes-Oxley Act are forcing businesses to strengthen their corporate data-tracking and analysis systems. Meanwhile, as software advances, increasingly sophisticated tools are available to help non-IT staffers such as sales and finances executives tap into business data.
“The big movement has been toward consolidating products into suites,” says Nucleus Research analyst Kathy Quirk. “Historically, BI tools were used by a small percentage of people within the company. Often you had to get the IT department involved to produce the reports and pull the data together. The move now is to reach out to your basic business user.”
One customer that recently picked Siebel Systems to underpin a major software overhaul, Sierra Health Services, did so in part because of the CRM vendor’s complementary analytics software. Including hardware, services and software, the Sierra Health’s CRM overhaul is budgeted at around $5 million.
The Las Vegas medical provider runs a variety of healthcare businesses that serve 580,000 customers throughout Nevada. The organization is outgrowing its 6-year-old CRM system from Onyx Software. “It was highly customized, and that creates roadblocks to be able to upgrade cost effectively,” says CIO Bob Schaich. “We knew we essentially had to have a complete replacement with the latest and greatest.”
As Schaich evaluated vendors, he was drawn to Siebel’s analytical software for studying sales performance, marketing campaigns and customer retention programs. “That was a real value-add for us,” he said. “It helped them get on our short list.”
Alltech Biotechnology Global MIS Projects Manager Eric Piersol can point to one very tangible benefit from his company’s analytics initiatives: No more animal feed additives rotting in Turkish import warehouses.
The Nicholasville, Ky., company has operations in more than 50 countries, a number of which import products from manufacturing plants elsewhere in the world. Because import taxes aren’t charged until the company formally accepts shipped items, shipping docks can become ad hoc storage sites for Alltech. However, timing is critical: The company’s animal nutrition products carry strict expiration dates.
“What actually did happen once was that quite a bit of product expired,” Piersol says. “If we imported it to throw it away, we’d have to pay tax, but we’d also have to pay to ship it back to Ireland – it becomes an expensive mess.”
Alltech last year replaced its aging reporting software with an analytics package from Exact Software, which also makes Alltech’s ERP system. The software integrates data from Alltech’s dozens of worldwide ERP installations – each country maintains its own database – and uses online analytical processing (OLAP) technology to create multidimensional data “cubes” that can then be sliced up as needed by individual users. Alltech sends the cubes out daily to relevant staffers. A production report that previously took days for an operations manager to compile now can be produced in half an hour, Piersol says.
Analytics project costs and returns vary as widely as the projects companies choose to tackle. A Nucleus Research ROI study of SPSS projects calculated the average initial cost of a deployment at $153,000. The report found 94% of customers reporting positive ROI, with an average payback period of just 10.7 months.
For network managers, analytics projects might entail a traffic swell – or they might generate no impact at all. “We didn’t experience much of a surge in terms of bandwidth,” Piersol says, but the project does tax Alltech’s e-mail system. The daily arrival of multi-megabyte data cubes, sometimes several at once, caused problems for staffers in low-bandwidth areas, so Alltech is working on switching cube delivery from e-mail to FTP.
“Network implications of analytic solutions are dependent upon the size of the user base, the frequency of data delivery and the size of the data files being delivered to end users,” Nucleus’ Quirk says. “We’ve seen some users choose to expand their network capacity when working on BI/analytical solution deployments.
IT leaders embarking on analytics projects must go in with very clear ideas about what information they have and what they want to extract, Quirk advises. “They need to take a hard look at all their data sources. Often the difficult part of these projects is connecting all the pieces together,” she says.
Cowley is a correspondent with the IDG News Service. She can be reached at stacy_cowley@idg.com.
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