12th September 2012
Enterprises will invest USD 120 billion in business analytics hardware, software and services by 2015. IBM is already pursuing the huge opportunity and is selling its smarter analytics solutions to banks, insurance companies, and telcos in India. But other verticals like healthcare, oil & gas, and manufacturing are also adopting analytics solutions to gain accurate business and customer insights for reducing errors, and mitigating fraud.
When IBM introduced its Smarter Planet initiative four years ago, it was on the cusp of something “big”. The initiative is about building smarter systems that harness data from various systems to solve the world’s most pressing problems of power and water shortages, traffic congestion and the like — by building smart grids, water management systems, intelligent traffic management systems, and green buildings. IBM observed there was a huge amount of data being generated from various sources — by users on social networks, by transaction systems and devices, and by sensors. A marketing expert coined a term for this: ‘Big Data’. In fact, an IDC study shows that data is growing at the rate of 60 percent per year. Businesses striving to derive meaningful insights from all this data are increasingly adopting analytics solutions. A recent IDC Asia/Pacific Semiannual Business Analytics (BA) Software Tracker says the market in the region grew by 20.1 percent, and was worth USD 2,479.1 million in 2011. The BA software market is expected to slow down but still grow in 2012, followed by a recovery in 2013. Overall, the market is forecasted to grow at a 5-year CAGR of 12.3 percent to reach USD 4,432.7 million in 2016. IDC estimates enterprises will invest more than USD 120 billion by 2015 in analytics solutions across hardware, software and services.
At its Smarter Analytics Media symposium in Bengaluru in August 2012, Shanker Annaswamy, Managing Director, IBM India said, “We are at an inflection point where we believe analytics has evolved from a business initiative to a business imperative. Companies that leverage analytics have 1.6 times better revenue, 2 times more profitability, and shareholder value has gone up 2.5 times.” Annaswamy was quoting IDC figures, but IBM has its own studies to prove this. CXO studies conducted by the Institute of Business Value (IBV), a joint initiative by IBM Global Business Services and MIT, show that top performing businesses use business analytics five times more than lower performers.
In the study, CXOs say that technology and skills are going to be a fundamental factor. And CMOs are leveraging technology like analytics to get more insights into customer preferences. “We are at the start of a new wave where analytics drive businesses in a smarter way,” said Vanitha Narayanan, Managing Partner, Global Business Services, IBM India/South Asia. “It’s no longer about what’s within the enterprise; every enterprise is equally affected by the data outside the enterprise, as much as data within the enterprise. So it is about understanding the data outside the enterprise, and being astute about what is surrounding you.” While IBM has suddenly steered its Smarter Planet juggernaut towards Big Data analytics, other IT companies have a first mover advantage.
Teradata, SPSS, Sybase, and the SAS Institute were among the first to smell this opportunity, and have long been selling analytics solutions to businesses around the world. SPSS was acquired by IBM in 2009. Soon Oracle, SAP, EMC and HP jumped on to the Big Data and analytics bandwagon. So what are IBM’s chances in this lucrative market, which is nowadays driven by Big Data hype?
IBM has a couple of strengths that could position it neck-to-neck with the current market leader, in the short-term. Firstly, it is the company with the largest number of patents in the world, with 500 patents just for analytics. Secondly, it has invested more than USD 16 billion for 30 acquisitions since 2005. Among the analytics and data companies it acquired are Cognos, SPSS, Netezza, RedPill Solutions, Coremetrics, i2 Limited, DemandTec, Emptoris, and Tealeaf Technology. And all these have been recognized leaders in BI, analytics, or data management.
Thirdly, it has set up software labs and research centers in India and around the world to apply these patents, drive innovation, and integrate all the software and IP it acquired. And then it has a global army of consultants, technical professionals, and business partners to drive its analytics play. Not to forget its base of premium customers that include leading companies across industries (some are mentioned later in this story).
“In addition to our workforce of 440,000 people across the world, we also have certified business partners to do the fulfilment. So we are very well positioned and have leadership in several areas, compared to any other company. We have leadership acquisitions in BI, driving business performance, trusted identity, and content management. We have invested in research labs and software labs across India. India is an important market for us, not only from a domestic perspective, but also globally,” said Annaswamy.
We believe IBM’s secret weapon that will help it attain leadership in the analytics space is an intelligent, well- integrated system called Watson. Last year Watson was used in a popular U.S. TV game show called Jeopardy. And Watson has beaten many intelligent humans in the game! With its analytical and natural language processing capabilities, Watson is now being applied to solve problems in healthcare, for reducing financial fraud, and also for national & border security.
The system goes into learning mode and builds a data bank by ingesting texts from (medical) journals over a period of a few months. And then it applies natural language processing to answer queries and solve problems. Potentially, Watson could be adapted to analyze and solve problems in banking, telecom, manufacturing and other sunrise industries.
That’s why IBM invested (and continues to invest) over USD 2 billion in the development of Watson. InformationWeek reported on Watson in August 2011 for its special issue on ‘IT in Healthcare’. See the story in our ‘Past Issues’ section on www.informationweek.in (link resides outside of ibm.com).
IBM ANALYTICS IN TELECOM
For telecom, IBM has a base of premium customers in India. The most notable example is Bharti Infratel. Last year, IBM was awarded a contract from Bharti Infratel (a subsidiary of Bharti Airtel), which owns 32,000 tower sites across 11 telecom circles. The IBM solution combines sensors, data tracking and analytics solutions to offer real-time visibility and insight so that Bharti Infratel can centrally monitor and manage its large and distributed tower infrastructure.
The solution helped the company automate the entire process, reduce costs and drive optimization, in addition to proactively preventing service outages. IBM is now working with another telco that has a base of 85 million subscribers. It is applying its data warehousing and smart analytics solution on customer data and call data records to explore new ways in which the telco’s network can be used.
Apart from Bharti Infratel, IBM won outsourcing deals from BSNL, Idea Cellular and Vodafone. In the first two decades, Indian telcos focused on developing their subscriber bases. However, the new focus is on retaining customers and offering personalized services. Telcos are engaging analytics solutions to understand usage and spending trends to cross-sell and up-sell new services.
IBM ANALYTICS IN BFSI
BFSI is another focus area for IBM and its focus has shifted to PSU banks, such as Punjab National Bank and State Bank of India. “The Indian public sector banks are done with core banking, and they are now at the start of the data warehouse and analytics journey. With core banking they got a set of operational reports, but now it is about understanding all the data about their customer,” said Narayanan. Annaswamy informed that IBM worked with a large PSU bank with a huge number of branches (he declined to name the bank). The bank had a very complex organizational structure with separate circles for retail and specialized business units catering to various segments (corporate, rural, SMB, personal, etc) the top management did not have a consolidated view of business across all functions of the bank on a near real-time basis. It took a long time to consolidate the data from all its branches and business units, which meant a delay in generating reports. This in turn slowed the decision making process.
“The CEO of the bank (we worked with) now has a dashboard that gives him parameters and indicators that help him take a (faster) decision and drive the bank’s performance — and this is what IBM is enabling. We also worked with a retail bank for their forecasting and demand projections. We helped them with their business intelligence unit and offered our forecasting model,” said Annaswamy. IBM said its Rapid Banking Analytics solution (developed at its Software Labs) can give these institutions a comprehensive view across claims and applications, customer service, workforce and overall performance. The solution facilitates management of risk, rural market penetration, growth/competition, market discipline & transparency, human resources management, customers’ retention and social & ethical practices.In the financial industry, analytics can also be used to check fraud. In fact two leading MNC banks in India have recently been in the news for their oversight in checking fraud and money laundering.
Financial services organization, Birla Sun Life Insurance (BSLI), has deployed IBM Cognos TM1 solution to radically transform the entire planning cycle from forecasting and analysis processes to budgeting and profitability modelling. BSLI required a solution to help it streamline its spreadsheet planning and budgeting process for data coming from more than 600 branches, and multiple products. IBM Cognos TM1 helped the company to integrate operational and financial planning on demand, which can rapidly determine resource requirements and forecast future business performance.
“With IBM’s Cognos TM1, we are able to plan better and monitor performance at a granular level and thus manage profitability and capital more efficiently. The solution is easy to use which our finance team can learn easily with minimal change management or skills upgrade. Also, the finance team is able to support the solution for their business users with minimal support from the IT team,” says Mayank Bathwal, CFO & Head - Institutional Sales, BSLI.
Infinity Insurance, a leading “non-standard” insurance provider, is applying IBM analytics to more than 25,000 automobile claims processed each month in order to identify patterns in historic data. Infinity specializes in covering high-risk drivers. In the first three months, Infinity reduced the time needed to identify fraudulent claims from 14 days to 24 hours.
OTHER VERTICALS & APPLICATIONS
Apart from BFSI and telecom, IBM Smarter Analytics solutions are used in healthcare, oil & gas, manufacturing and other industries.“The boundaries between industries are blurring. If you are a retail bank, you are both a bank and a retailer. An e-retail company is both, a retail (shop) and an online business. So businesses are looking for benchmarks in areas where customers want to be served. They are looking beyond their industries for the best in class in their peer group,” said Narayanan. As we mentioned earlier, IBM is now applying Watson to solve problems in Healthcare. It believes predictive analytics can be used to reduce medical errors by up to 55 percent.
HMEL, a joint venture between Hindustan Petroleum Corporation Limited and Mittal Energy Investment, has adopted a new IBM analyticsbased solution to boost business performance by better managing their financial data. The solution integrates information from various components of the manufacturing execution systems (MES), ERP, and control systems within the refinery and delivers a consolidated single view of the data. According to IBM, the new technology will help HMEL to analyze key corporate business processes including planned versus actual investments, production, and key performance indicators, among others. The system will generate near real-time information for HMEL business executives to make more intelligent decisions around optimizing productivity and margins.
“The IBM analytics solution not only delivers the ability to access data consistently but also equips the organization with the power to interpret, transform and derive process operation actions from the information. It provides an industry standards based information model and associated integration techniques, enabling HMEL to turn data into information that can be accessed and delivered through web services,” IBM said in a statement. At the IBM Smarter Analytics Symposium, the writer also witnessed demos of solutions for social media analytics and fraud detection.