Analytics: Reality and the Growing Interest

May 31, 2009
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This is a guest post by Bhupendra Khanal, CEO of InRev Systems.

InRev Systems is a Bangalore-based decision management company, which works on Data Based Information Systems. Their areas of interest  are marketing services, Web information, MIS reporting, social media services and economic research. Bhupendra also maintains a personal blog at Business Analytics.

Introduction
A huge amount of data is collected by any business today. There are also certain data collection agencies who have information like economic variables, demographic variables, police fraud list, loan default list, telephone and electricity bill payment history, etc. All these data, if analyzed, tends to separate people into various similar groups. These groups can be fraudulent group, defaulter group, risk averse and risk takers group, high income and low income groups, etc.

Based on this information, many business decisions can be made in a better and rational way. Analytics leverages almost the same concept but with assumptions:

  • The behavior of people do not change with time
  • People with similar profile behave similarly

Predictive modeling and segmentation are the major components of analytics. The profile


This is a guest post by Bhupendra Khanal, CEO of InRev Systems.

InRev Systems is a Bangalore-based decision management company, which works on Data Based Information Systems. Their areas of interest  are marketing services, Web information, MIS reporting, social media services and economic research. Bhupendra also maintains a personal blog at Business Analytics.

Introduction
A huge amount of data is collected by any business today. There are also certain data collection agencies who have information like economic variables, demographic variables, police fraud list, loan default list, telephone and electricity bill payment history, etc. All these data, if analyzed, tends to separate people into various similar groups. These groups can be fraudulent group, defaulter group, risk averse and risk takers group, high income and low income groups, etc.

Based on this information, many business decisions can be made in a better and rational way. Analytics leverages almost the same concept but with assumptions:

  • The behavior of people do not change with time
  • People with similar profile behave similarly

Predictive modeling and segmentation are the major components of analytics. The profile and the behavior of a set of people are taken, and a relationship is identified. This same relationship is used for building future profiles and predicting the behavior of people having the same profiles. This is commonly done using advanced statistical techniques like regression modeling (linear, logistic, and Poisson, etc.) and neural networks.

The business analytics services market comprises solutions for storing, analyzing, modeling, and delivering information in support of decision-making and reporting processes.

Analytics, regardless of its complexity, serve the same purpose – to assist in improving or standardizing decisions at all levels of an organization.

Size and Type of Market
The size of the analytics market globally is estimated around $25 billion today. It is increasing very fast, doubling almost every five years for the last few decades, with $19 billion dollars in 2006. It is expected to grow to $31 billion by the end of 2011 (source – IDC 2007).

There are many areas for the implementation of analytics. The most common analytics practices are risk management, marketing analytics, web analytics, and fraud prediction. These functions are handled by different organizations in different ways, with most companies maintaining a fine balance with the in-house team, outsourcing partner and consulting project vendors. Such variation makes calculation of market size very difficult.

Risk management is one of the largest component of the analytics industry today, and it is the pioneer component too. The market is huge in the U.S. and Europe; Asia Pacific is coming up fast and it is yet to get full swing in China and South Asia, including Nepal.

Web analytics (analytics of Web data) has picked up very fast and it is increasing by more than 20% for the last few years, thanks to the revolution led by Amazon, Google and Yahoo. Web Analytics market is a late entrant but have already passed the one billion mark.

The biggest of all is the marketing analytics (MA) and strategy science component. This is really huge owing to the effort put in by companies like Dunhumby and Axioms. MA is critical as it tends to compete directly with marketing research firms and strategy consulting firms in the type of work it does. This makes it difficult to calculate the market size but it is worth billions of dollars.

Big Players in the Area
The size of the analytics market is huge today but the industry is fragmented. None of the core analytics and decision management company has ever touch a billion dollar revenue mark.


Fair Isaac is the pioneer and the largest decision management company with revenue of around 800 million dollars. The other core DM and analytics companies are quite smaller. This has happened due to the aggressive moves by IT services companies and information bureaus to acquire analytics companies.

Experian, Transunion and Equifax are three major bureaus in the U.S., while there are others, too:  Innovis, Axiom, Teletrack, Lexis Nexis, etc. Each of these bureaus has analytics services as their offerings. Apart from these, the BI majors like SAS, SPSS, Salford Systems, etc., offer analytics services.

The Indian analytics market is small but growing. This can be justified by the more-than-double salary hikes in analytics compared to the software domain. The outsourcing shops and India-focused companies both have mushroomed in the last five years in India while the problem remains in getting proper talent and retaining them.

Major Banks like ICICI and HDFC have their strong, in-house analytics units, while SBI has partnered with GE Money for analytics support for their cards portfolio. The smaller banks are yet to start.

Other majors in non-banking industries are also using analytics through outsourcing or consulting. Airtel and Reliance are leading the way for the use of analytics in India in Telecom.

Scope on how it can grow: Indian Context
The analytics industry is growing fast. It has the scope of forming a separate process across industries like HR, operations, and IT systems. IT is now in the early stage of process metamorphosis, where each process start through consulting, grows through in-house establishments, and finally settle down as outsourcing to third parties.

The future growth depends on the approach of major players and consolidation of the industry. All this will make it a high value and high growth industry, where players can provide high quality products and services while maintaining their profitability.

Another big challenge is the supply of quality man-power and training. Today India neither has good institutes training people on analytics nor has it got an Infosys for analytics (who can employ and train huge number of freshers). Even the number of good statistics and mathematics institutes in India is less.

Amidst all these challenges, India is positioned fairly well in the world today, and it will be interesting to see if it can become a knowledge process and analytics hub in the days ahead.