Organisations that embrace analytics effectively make huge gains which can come from operational cost-savings as well as customer-related activities, says Alys Woodward, practice lead for big data, IDC European IT Group
When trying to find a service from your local council, you could be forgiven for thinking analytics will never reach the UK. You may change your mind if you use Amazon or Netflix recommendations, or even on seeing what Clubcard vouchers Tesco chose to send you. Seeing really good examples of how the power of analytics helps companies understand customer’s needs and wants that in some cases they haven’t even articulated yet, brings home its importance.
In 2013, Tesco reported that it had saved £100 million in supply chain costs from an analytics program that encompassed statistical demand forecasting for distribution depots to optimise stock and integration of weather data to show the effects of weather on produce demand. This differs depending on the location and recent weather. Tesco is also investigating analytics usage to save utility and fridge-cooling costs. This is apart from extensive use of analytics on the Tesco Clubcard loyalty data.
The big data technology industry itself is growing at a healthy rate. IDC recently sized the UK big data market for technology and services at $500 million in 2013. Of this amount, 29 per cent relates to services, 25 per cent to storage, 23 per cent to software, 18 per cent to servers and 5 per cent to networking. The proportion of storage rises to 33 per cent by 2018, as organisations ingest and hold on to datasets that grow over time in order to analyse seasonal trends.
But is the analytics industry “mature” or not? Many large retailers, banks and telecommunications companies have been analysing data for decades, for marketing contacts, churn analysis – which customers will leave – and portfolio risk among other examples. However, that mature use is generally confined to large organisations and started in business-to-consumer or B2C, although utilities (now evolving towards B2C) and manufacturing (in seeking closer relationships with its end-users) are catching up. Smaller organisations vary; some have strong use of analytics, but others have confined their management of business information to spreadsheets.
IDC recently sized the UK big data market for technology and services at $500 million in 2013
One thing is clear; maturity varies. The most advanced usage is hugely advanced, but many organisations are yet to take their first steps into analytics. An important effect of big data will be to democratise technologies and practices that were previously only affordable and workable for the largest organisations. For example, educational institutions can now access analytics that can predict which students are likely to drop out or struggle with which courses, by uploading anonymised student information into a secure cloud-based service.
In order to allow analytics to thrive, government needs to attempt to set a framework of how data can and can’t be used with a view to privacy and ethics.
Privacy concerns won’t go away. Governments need to engage in privacy conversations, otherwise initiatives could suffer from consumer backlashes. For example, tracking customers round stores via their smartphones is completely common practice, but many UK consumers may not be aware of this.
Privacy is not just about the data an organisation collects, but the potential to integrate it with other data. Many types of data, such as phone usage, internet searches and utility usage, can be made anonymous, but if they can be cross-referenced with electoral roll data the anonymisation can easily be broken. Thus, government policy needs to look at how data is used, as well as how it is collected.
But it needs to look at this sooner rather than later – grey areas around this complicated arena inhibit companies trying to leverage the data they have for monetary and societal benefit. The quicker we know where the boundaries are, the faster we can build within them.