Sunday, May 31, 2009

Analytics: Reality and the Growing Interest

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 interest areas are Marketing Services, Web Information, MIS Reporting, Social Media Services and Economic Research. Bhupendra also maintains a personal blog at Business Analytics.

Huge amount of data is collected by any business houses 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, tend 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 relation is found out. This same relation 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 etc. 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 US 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 by companies like Dunhumby, Axiom and others. 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 US 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 hike rates 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 unit 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 System. IT is now in the early stage of process metamorphosis, where each process start through consulting, grow 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.

Monday, May 18, 2009

A Tale Of Two Banks and One Telecom Service Provider

I have bank accounts at ICICI & Citibank (India). I also use credit cards of these two companies. Let’s first talk about their Mobile Banking services. ICICI has the following options:

My account getting credited above
My account getting debited above
Salary credited to my account #
Cheque deposited in my account bounced
Account Balance above
Account Balance below
Debit Card Purchases above

Messages for the above can be received through SMS, Email or both.

Citibank calls it Alerts, and they offer the following options:

Withdrawal balance by account
Withdrawal balance by account
Time deposit maturity advice
Cheque Status
Cheque Bounce Alert
Time Deposit Redemption Notice
Cheque dishonor

These messages can be received through SMS, Email or Both depending on the alert type. Also, for some of the alerts, message frequencies can be chosen as Daily, Weekly, or Monthly.

At first glance, it seems that Citibank offers more options but a closer look will reveal ICICI has done more research and come up with a better offering. The Citibank alerts are based on how frequently you want them while ICICI’s alerts are based on particular (defined by the customer) credited and debited amounts. ICICI’s options make more sense as I don’t want alerts daily or weekly, but only when I have made a transaction.

And because of the lack of options, I continue to receive daily alerts on my Citibank account balance irrespective of the fact that the balance remains the same or I haven’t done any transaction for a month. Also, the system at Citibank looks like a typical CRM system while the one at ICICI looks more like a BI system.

Now, let’s discuss their Credit Cards and their Customer Analytics.

I have been using an ICICI Gold credit card for almost 3 years now. I used it to pay all my bills – electricity bill, mobile bill, internet bill, shopping bills….and I paid all dues in time. I applied for and got the Citibank Gold card about a year after I got my ICICI card. I used the Citibank Gold card for 2-3 purchases, paid all the dues in time, and Citibank increased my credit limit every time.

Encouraged by their response (I got very nice emails from their customer service) and actions (increase of credit limit), I started using the Citibank Gold card more frequently. In a few months’ time, I got a free-for-life Citibank Platinum card with all these attractive features and benefits. I even got an invitation to join a wine club though I’m more of a rum and whiskey guy. Don’t blame them though; getting your hands on such kind of consumer lifestyle/preferences data will be next to impossible in India.

I have now almost forgotten the ICICI Gold card; I use it very rarely these days. The credit limit given to me 3 years back still remains the same. And I have never received a single email or communication from ICICI. I also know that ICICI bank outsources its Customer Analytics to an Analytics Service Provider in Mumbai. So where is the up sell analytics? Doesn’t their data show the fact that I am “almost” leaving now? That again reveals the fact that customer spending information is not at all analyzed and they are not doing much about customer churn either.

On a different note, I am a post-paid mobile customer of India’s largest telecom service provider, Airtel
. Every month, whenever my bill is generated I receive about 6 SMSs from Airtel within the next 5-6 days. The messages can be summarized as:

1. Your bill has been generated…
2. You can view your bill at your online account…
3. Your bill has been emailed to and the password to open it is… and if you haven’t received it… (this is actually 2 SMSs because of the length of the message)
4. Your bill amount is XXX…
5. Your bill amount is XXX and the last date of payment is…

For the last 3 years or so, I have been paying all my bills before the due date. Once I got so irritated that I emailed their customer service, and their reply? These are server generated messages and we can’t do anything about it. I got more irritated and asked my email to be forwarded to Airtel’s CRM, Business Intelligence, Analytics or whatever the team there like to call themselves!

I got just one SMS alert when my next month’s bill was generated. But it was back to square one from the 2nd month onwards.

My question is which “smart” manager came up with the idea that 6 SMSs should be sent to all their post-paid customers every month? Why doesn’t one SMS saying “Your bill amount of XXX has been generated and the due date is ABC” suffice? Has anyone at Airtel calculated the cost of sending 5-6 SMSs to all their post-paid customers, every month? Shouldn’t the last SMS be sent only to those customers who have a habit of making late payments? Do they send the second SMS to those customers who don’t have online accounts too? And why can’t these alerts be customized based on a customer’s usage and payment behavior?

I can give more examples of Indian companies in the retail, entertainment, and services sector that are not doing nothing or very little about all the customer data they have, inspite of mentioning or advertising that they use BI & Analytics. So how mature is the Business Intelligence, and CRM Analytics setup at Indian companies? And how skilled or knowledgeable are the senior people associated with it?