Trend

Making intelligent predictions

India Inc now has tools to predict the future without having to depend on gut feel or psychics. Aishwarya Ramani takes a look at the market for Business Intelligence software.

Customer acquisition and retention is probably the pillar of success for companies. They are now looking to profile their customers so as to execute the best CRM practices to enrich the experience they deliver to their customers, and are looking to become ‘Customer Intelligent.’

The IT departments in large Indian enterprises have mastered the art of having Online Transaction Processing (OLTP) systems in place. With an ERP system spanning enterprise processes, every organisation has amassed huge amounts of data about its customers, processes and sales. The state of ERP systems has now reached levels where, despite the availability of data, there is a dearth of information.

In order to make strategic decisions that will impact the bottom-line, organisations are looking for more than reports generated by ERP systems. The need is to track growth by examining key performance indicators (KPIs) that have been identified. “Companies have exited from building core systems or transaction systems. They are now faced with a tremendous amount of data,” observes Ram Gurudu, Regional Director, South Asia, Cognos. ERP systems give tactical reports which are adequate in the beginning, but companies are finding that they need more than that.

They want to have solid premises to back the strategic decisions that they must take. Business Intelligence (BI) helps them do just that. With every company looking for a competitive edge, BI is booming. According to Frost & Sullivan, the BI market comprises tools and services that enable enterprises to organise, refine and analyse historical and present data obtained from different channels such as operational transaction systems e.g. ERP, CRM or embedded databases.

Performance management is another issue that troubles decision-makers. Strategic matrices are set by every company, and then the need is felt to track the growth of the organisation with respect to these matrices. “Companies wish to set performance goals and track them as they go along, and when they hit a speed-breaker, understand why it happened,” says Gurudu. ERP systems record information everyday, so there is a need to track performance against goals that have been set and look for deviations, if any.

As far as the maturity of BI goes, according to Alok Shende, Director, ICT Practice, Frost & Sullivan, “it is in the early stages of development in India.” The banking and telecom sectors were early adopters of BI. The banking sector uses BI for risk management and compliance, while in telecom it is used for churn management. In manufacturing, BI has been deployed in areas such as warranty management, while in FMCG it is used for campaign management and to identify the behavioural pattern of consumers.

Initially, BI was a tool that sat above traditional ERP systems that were used by middle management or analysts (here, by analysts, we mean middle management folk who are responsible for analysis) to analyse data. “Most of our customers had initially deployed BI for reporting,” says Sanjay Deshmukh, Country Sales Manager, Business Objects, India/Saarc. BI was initially adapted only by large enterprises and people who were willing to spend big on IT.

"Companies are looking to understand the propensity of their customer to buy a product. For this purpose, looking at historical data is just half the issue" - Sudipta Sen Managing Director & CEO SAS Institute

If you examine the scene today, the maturity is clearly visible. “Many SMBs are moving towards BI,” notes Sudipta Sen, Managing Director and CEO, SAS Institute, and this could only mean that the competition in this sector is intensifying. “BI is more of a strategic enabler,” adds Sen. From all this one can infer that the SMBs are now looking for that competitive edge too.

"We have customers who only use one service that we provide. However, there are also customers who use more than one of these services" - Ajay Kelkar Senior VP & Head, Marketing HDFC Bank

While on the issue of BI maturity, the immediate question that arises is whether or not SMBs have the kind of historic data that is needed for observing trends. Shende cites the case of core banking. “Penetration of core banking in India is low. There is still a lot of uncovered ground. This is true for smaller banks. However, I do see us moving from being a data-deficient country to a data-rich country.” It is easy to infer that BI does have a promising future.

What can clearly be observed is that not all companies are making effective use of BI for forecasting, and that not all strategic decisions can be made on the basis of historic trends. For example, a sudden drop in sales during the peak season may be attributed to natural calamities during that period. If these external factors are not taken into consideration, just observing trends will lead to faulty analysis. “Budgeting, planning and forecasting is a part of BI deliverables. However, most old economy companies still use traditional tools for forecasting such as Excel sheets,” comments Deshmukh.

Casting light on how companies go about forecasting is Sen. “Companies are looking to understand the propensity of their customer to buy a product, the propensity of default, etc. For this purpose, looking at historical data is just half the issue.” What is of importance (apart from this historical data) is the data collected from people who are closest to the end-users. “While forecasting, companies want to make judgements and assessments that are as close to reality as possible. This is possible only if people from every part of the enterprise are engaged,” says B N Suresh Chandra, Country Manager, Cognos India.

Understanding BI

So are Indian companies mature enough to understand the difference between data warehousing and BI? According to vendors, a data warehouse is not imperative to deployment of a BI solution. “Even an Excel sheet that gives you data which you can base your strategic decisions on can be called business intelligence,” opines Gurudu. Vendors feel that BI is any tool which enables users to take decisions.

"Customers know exactly what they want. They are able to perfectly articulate their expectations from our solution" - Sanjay Deshmukh Country Sales Manager Business Objects, India/Saarc

Companies are looking to provide decision-making information to people at lower managerial levels such as dealers. (Traditionally, BI tools have been the preserve of analysts.)

Explains Deshmukh, “BI applications are targeted at three categories of users—senior management, analysts and operational users. Senior management looks at BI for dashboards, to monitor a few KPI, and to define thresholds. Middle managers such as marketing or finance managers use BI to analyse data and observe trends. Operational users use it to create reports and look at these reports to make decisions.”

Regarding the confusion in users’ minds vis-à-vis BI terminology, vendors have differing arguments. Deshmukh is of the opinion that the reason for the confusion is that BI isn’t as mature as, say, ERP. He supports the claim that most users confuse BI, data warehousing and data mining, although he adds, “Customers know exactly what they want. They are able to perfectly articulate their expectations from our solution, so we pay more attention to their goal than to the terminology that they use.”

According to Steve Illingworth, Senior Director, BI Products, Oracle Asia Pacific, “While awareness of BI is increasing, many current implementations are of a tactical nature and are custom-built, under-utilising the capabilities of existing technologies. To a certain extent, a number of these implementations are designed to consolidate data from core applications instead of being used as a strategic BI asset.”

Challenges remain. “We expect to see increasing consolidation of data into a ‘single source of truth’ in the Indian enterprise. The Indian market has possibly one of the largest data volumes in the Asia Pacific, if not the world. Other benefits for Indian businesses deploying BI include near real-time data access, which enables execution of decision-making based on real-time data,” says Illingworth.

BI and beyond

With BI, depending on the dimensions across which data is examined, the outcome of analysis differs from person to person and job role to job role. In future we expect to see BI becoming pervasive. The key issue here is the proximity of forecasts to real-life scenarios. When an employee is empowered with the right kind of information the decisions he make are that much more effective. However, there is the flip side—how do you know when you are providing too much information and overwhelming the decision-maker?

Banks, for example, can use BI to cross-sell a particular scheme to a customer depending on his credit-card usage patterns. However, an improper study of customer behaviour would cause the same bank to choose the wrong target audience.

Data volumes will not just grow (that’s a given); they will, in fact, be overwhelming. It won’t be long before companies start accumulating data by the second. And it is not hard to imagine a time when an FMCG major embeds a nanotech chip in a bar of soap to determine the exact time a unit was sold or even to determine usage patterns. If this technology matures to that point, companies will be able to strongly profile their consumers.

The limits that CRM can reach by examining real-time data are enormous. Recording real-time data can lead to greater understanding of a situation. This might seem rather far-fetched, but a technology that records intimate data of this sort is not far-fetched. In order to fight competition and increase marketshare, companies are willing to go to any heights to capture the interest of the customer and track his performance across all dimensions. BI can play a major role in this endeavour.