Four reasons why the time is right for IBM to tackle Advanced Analytics

IBM has dominated a good deal of the news in the business analytics world, recently. On Friday, it completed the purchase of SPSS and solidified its position in predictive analytics.  This is certainly the biggest leg of a recent three-prong attack on the analytics market that also includes:

  • Purchasing Red Pill.  Red Pill is a privately-held company headquartered in Singapore that provides advanced customer analytics services –  especially in the business process outsourcing arena.  The company has talent in the area of advanced data modeling and simulation for various verticals such as financial services and telecommunications. 
  • Opening a series of solutions centers focused on advanced analytics.  There are currently four centers operating now: in New York (announced last week), Berlin, Beijing, and Tokyo.  Others are planned for Washington D.C. and London. 

Of course, there is a good deal of organizational (and technology) integration that needs to be done to get all of the pieces working together (and working together) with all of the other software purchases IBM has made recently.  But what is compelling to me is the size of the effort that IBM is putting forth.  The company obviously sees an important market opportunity in the advanced analytics market.  Why?  I can think of at least four reasons:

  • More Data and different kinds of data.  As the amount of data continues to expand, companies are finally realizing that they can use this data for competitive advantage, if they can analyze it properly.  This data includes traditional structured data as well as data from sensors and other instruments that pump out a lot of data, and of course, all of that unstructured data that can be found both within and outside of a company.
  • Computing power.  The computing power now exists to actually analyze this information.  This includes analyzing unstructured information along with utilizing complex algorithms to analyze massive amounts of structured data. And, with the advent of cloud computing, if companies are willing to put their data into the cloud, the compute power increases.
  • The power of analytics.  Sure, not everyone at every company understands what a predictive model is, much less how to build one.  However, a critical mass of companies have come to realize the power that advanced analytics, such as predictive analysis can provide.  For example, insurance companies are predicting fraud, telecommunications companies are predicting churn.  When a company utilizes a new technique with success, it is often more willing to try other new analytical techniques. 
  • The analysis can be operationalized.  Predictive models have been around for decades.  The difference is that 1) the compute power exists and 2) the results of the models can be utilized in operations.  I remember developing models to predict churn many years ago, but the problem was that it was difficult to actually put these models in to operation.  This is changing.  For example, companies are using advanced analytics in call centers.  When a customer calls, an agent knows if that customer might be likely to disconnect a service.  The agent can utilize this information, along with recommendations for new service to try to retain the customer. 

 So, as someone who is passionate about data analysis, it is good to see that it is finally gaining the traction it deserves.

IBM Business Analytics and Optimization – The Dawn of New Era

I attended the IBM Business Analytics and Optimization (BAO) briefing yesterday at the IBM Research facility in Hawthorne, NY.   At the meeting, IBM executives from Software, Global Business Services, and Research (yes, Research) announced its new consulting organization, which will be led by Fred Balboni.   The initiative includes 4000 GBS consultants working together with the Software Group and Research to deliver solutions to customers dedicated to advanced business analytics and business optimization. The initiative builds off of IBM’s Smarter Planet . 

 

IBM believes that there is a great opportunity for companies that can take all of the information they are being inundated with and use it effectively.  According to IBM (based on a recent study), only 13% of companies are utilizing analytics to their advantage.  The business drivers behind the new practice include the fact that companies are being pressured to make decisions smarter and faster.  Optimization is key as well as the ability for organizations to become more predictive.  In fact, the word predictive was used a lot yesterday. 

 

According to IBM, with an instrumented data explosion, powerful software will be needed to manage this information, analyze it, and act on it.  This goes beyond business intelligence and business process management, to what IBM terms business analytics and optimization.  BAO operationalizes this information via advanced analytics and optimization.  This means that advanced analytics operating on lots of data will be part of solutions that are sold to customers.  BAO will go to market with industry specific applications

 

‘Been doing this for years

 

IBM was quick to point out that they have been delivering solutions like this to customers for a number of years Here are a few examples:

 

·        The Sentinel Group , an organization that provides healthcare anti-fraud and abuse services, uses IBM software and advanced analytics to predict insurance fraud.

·        The Fire Department of New York is using IBM software and advanced analytics to “ build a state of the art system for collecting and sharing data in real-time that can potentially prevent fires and protect firefighters and other first responders when a fire occurs”.

·        The Operational Risk data exchange (ORX) is using IBM to help its 35 member banks better analyze operational loss data from across the banking industry.  This work is being done in conjunction with IBM Research.

 

These solutions were built in conjunction with the members of IBM Research who have been pioneering new techniques for analyzing data.  This is a group of 200 mathematicians and other quantitative scientists.  In fact, according to IBM, IBM research has been part of a very large number of client engagements.  A few years back, the company formalized the bridge between GBS and Research via the Center for Business Optimization.  The new consulting organization is yet a further outgrowth of this. 

 

The Dawn of a New Era

 

The new organization will provide consulting services in the following areas:

·        Strategy

·        Biz Intelligence and Business Performance Management

·        Advanced Analytics and Optimization

·        Enterprise info management

·        Enterprise Content management

 

It was significant that the meeting was held at the Research Labs.  We lunched with researchers, met with Brenda Dietrich, VP of Research, and saw a number of solution demos that utilized intellectual property from Research.  IBM believes that its research strength will help to differentiate it from competitors.

 

The research organization is doing some interesting work in many areas of data analysis including mining blogs, sentiment analysis, and machine learning and predictive analysis.  While there are researchers on the team that are more traditional and measure success based on how many papers they publish, there are a large number that get excited about solving real problems for real customers.   Brenda Dietrich requires that each lab participate in real-world work. 

 

Look, I get excited about business analytics, it’s in my blood.  I agree that world of data is changing and companies that make the most effective use of information will come out ahead. I’ve been saying this for years.   I’m glad that IBM is taking the bull by the horns.  I like that Research is involved. 

 

It will be interesting to see how effectively IBM can take its IP and reuse it and make it scale across different customers in different industries in order to solve complex problems.  According to IBM, once a specific piece of IP is used several times, they can effectively make it work across other solutions.  On a side note, it will also be interesting to see how this IP might make its way into the Cognos Platform.  That is not the thrust of this announcement (which is more GBS centric), but is worth mentioning.  

 

IBM and the Smarter Planet

I was at the IBM software analyst meeting this past week and got the opportunity to hear about IBM’s impressive new initiative called Smarter Planet.  This is big, bold stuff; perhaps even bigger than the company’s eBusiness initiative.   The idea behind the effort is to use technology to make the world smarter.

What does this mean? On November 6, 2008, IBM CEO Sam Palmisano spoke to the Council of Foreign Nations in NYC about Smarter Planet.  He described how the world is becoming more instrumented, interconnected and intelligent.  He cited projections that by 2010, there will be 30 Billion RFID tags and 1 billion transistors per person.  These devices help to make our world interconnected.  These devices can also communicate with eachother and the information from them analyzed for better outcomes.

In short, if done properly, all of this instrumentation, interconnectedness, and intelligence can be used to help make the world a better place.  IBM has collected a series of mind-boggeling statistics about the amount of waste that happens in the world.  For example, $11.5B/yr in food is wasted in India, post harvest.  The consumer and retail products industry waste $40B/year in the supply chain, countries around the world lose anywhere from 40-60 percent of their energy because of outdated energy grids.  

IBM’s vision is to make the world work better.  At the analyst meeting, Sandy Carter and John Kennedy described how IBM is mobilizing for a smarter planet.  They outlined three major elements from the IBM software side:

  • Dynamic Enterprise. This part of the equation is about creating a dynamic, agile business model.  It includes a dynamic infrastructure, connected customers, and  dynamic business process
  • New Intelligence. With an instrumented data explosion,  powerful software will be needed to manage this information, analyze it, and act on it.
  • Green and Beyond.  Finally companies are beginning to take green seriously.   Countries like Japan are imposing penalties for companies that exceed their allotted carbon footprint.  Technology can help reduce the carbon footprint and it can also help monitor that footprint.

 In keeping with IBM’s new industry vertical strategy, Smarter Planet solutions will be algined with various industries.  Here are just two examples of Smarter Planet at work: 

  • Smart Utilities. IBM is helping to make energy grids smarter.  These grids use sensors  meters, digital controls and analytic tools to automate, monitor and control the two-way flow of energy across operations.   This means that power companies can optimize their performance better and allow individual consumers to manage their energy consumption smarter, even down to the applicance level (if the appliance is part of the network)
  • Smart Transport.  RFID is being used to track poultry and meat from the farm to the supermarket.  This means, for example, that factors such as temperature and humidity can be monitored while the meat and poultry is in route,  so if the temperature becomes too hot, someone is notified.  This can dramatically cut down on waste.

Clearly, the impact of this can be enormous.

At the event, I got excited about the Smarter Planet iniatitve.  With all the bleek and dismal news out there today, it was refreshing to hear something positive.   Frankly, it was hopeful.  Here’s what Sam Palmisano said toward the end of his speech that I found quite insightful:

That’s why a period of discontinuity is, for those with courage and vision, a period of opportunity. Over the next couple of years, there will be winners, and there will be losers. And though it may not be easy to see now, I believe we will see new leaders emerge who win not by surviving the storm, but by changing the game.”

There is a big  opportunity here.  Sure, companies are hunkering down now.  The reality, though, is that the organizations that bury their heads in the sand will not be well positioned once we come out of this crisis.  Plus, it makes sense to work for a better world.

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