Analyzing Business Analytics

April 20, 2005

Analyzing Business Analytics

Analyzing Business Analytics

by Fern Halper and Marcia Kaufman, Partners

Introduction

Information and decision-making usually go hand in hand. Better quality information and better analytical tools generally lead to improvements in strategic decision making. We are only now starting to see a critical mass of companies effectively using analytical technologies that have been in existence for decades. Decision makers who utilized these technologies, say twenty years ago, were lucky in some respects; chances are they built their own predictive algorithms, were able to use statistical packages that were developed in-house and purchase others, and had an edict to leverage advances in database technologies and executive information systems.

On the other hand, these early adopters also had to struggle against the database management systems (hierarchical or relational) of the day, data storage issues, data cleansing and transformation, and the inability to make use of “real time data”, even if it was available. We had the data and we had the algorithms; but there was a gap between the two. We made it work successfully, but not all companies could afford to do so.

Today, companies have a wealth of technology to choose from when thinking about how to utilize information to their best advantage. This has helped business intelligence to become mainstream and other technologies such as predictive analytics to begin popping up on many CIO’s radar. Over the next few months, Hurwitz & Associates will take a deep dive into this area of business analytics, that is, those technologies used to support people making business decisions. We’ll look at these technologies and spotlight a selected number of companies in the space.

Categories of Business Analytics Software

What does business analytics include? Hurwitz & Associates groups a number of (overlapping) technologies under the category of business analytics. These include analytical technologies as well as the information infrastructure needed to pull it all together. Our list of analytical technologies includes general analytical software as well as software that can be more focused on a certain business area or challenge. In some instances, larger business analytics vendors will provide solutions in many of these categories. Our list of technologies includes:
    ?     Business Intelligence (BI). BI software is used to help organizations make more informed decisions. The software generally consists of query and reporting capabilities – what we used to call “slice and dice and shake and bake.” You can use the software to break down information such as sales by region, sales by product, sales by salesperson, etc. Usually there is an OLAP (online analytical processing) engine underlying this, which understands how the data is organized and can structure it for swift access. BI software products may include more sophisticated algorithms such as predictive analytics, described below.
    ?     Predictive Analytics. The term “predictive analytics” came on the scene a few years ago to describe a category of software tools that are used to forecast behavior. The term grew out of the broader field of data mining and advanced statistical analysis that includes all techniques that help users to sort through large amounts of data to identify patterns and establish relationships. A recent trend in the predictive analytics space is to simplify such products so non-experts can use these tools. The jury is still out on how well this is succeeding.
    ?     Visualization. We separate this from predictive analytics because while the visualization tools are used in predictive analytics, they are also useful in data exploration. A best practice in data analysis is to first “interact with” your data before you test a hypothesis. We’re not talking about generating simple pie charts and bar charts. Visualization technologies may provide coloring-coding, linking, drill down from summary to detail, multidimensional visuals and more. The software is also generally used on very large amounts of data.
    ?     Business Service Management (BSM). BSM involves viewing and managing IT infrastructure from a “business” services perspective. We include Business Service Management here because this software helps organizations understand what is happening with their business services (infrastructure) and this information can be used to provide useful insight to the business.
    ?     Business Performance Management (BPM). BPM is a methodology that helps organizations run their business better. It moves away from looking at just profit/loss related data to utilizing Key Performance Indicators (KPIs). Companies put together a set of metrics that they will use to run their business and then gather the data needed to populate these metrics. These measurements can fall into a number of categories: financial, customer satisfaction, employee satisfaction, and so on. The performance management system captures the information that feeds these metrics.
    ?     Customer Relationship Management (CRM). CRM software utilizes customer-focused data, collected across multiple channels, in order to understand customer behavior and needs. This intelligence is then used to improve marketing campaigns, boost sales and improve customer service. CRM software is often offered as a suite of tools and applications to help with sales force automation, marketing management, and call center management. These suites can include fairly sophisticated analytical capabilities to understand customer behavior. Large BI vendors often include analytical CRM as part of their offerings. Web analytics can fall into this category, as well.
    ?     Supply Chain Management (SCM). Supply chain management software is designed to help companies run their supply chain operations with their partners and customers more effectively. SCM software helps companies find materials, manufacture product, and deliver it to the customer. It includes warehouse management and inventory tracking. This software can also provide fairly sophisticated analytical tools to help in forecasting and strategic sourcing.

Stay tuned – Next month we’ll look at the information infrastructure needed to make this all happen. And, we’ll begin to do a deeper dive into a number of these technologies and spotlight vendors in this space.

 

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