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IBM Launches 'Analytics and Optimization' Practice

Consulting, software and research groups back 4,000-employee practice. Banks, public agencies, telcos, retailers and utilities are seen as best prospects.
IBM announced yesterday that it will draw more than 4,000 consultants from its BI, information management, performance management, content management and enterprise integration practices and dedicate them to delivering "IBM Business Analytics & Optimization Services." The new practice is described as formalizing what has been a collaborative initiative backed by IBM Global Business Services (GBS), the IBM Software Group and IBM Research, which are said to have already completed some 400 analytics- and optimization-related engagements within the last year alone.

"We believe business analytics and optimization will become pervasive in the way businesses operate and pervasive across our practice," said Fred Balboni, the GBS veteran who will lead the practice. "In our research we've found that about 13 percent of our consulting clients are already using analytics to their advantage, but the other 87 percent represents a massive opportunity... Clients increasingly want to develop the capability to not only detect and react but to be able to predict. It's not just about reporting; it's about understanding exactly where you're going to land."

Two customers were on hand at the announcement, held at an IBM Research facility in Hawthorne, NY, to describe analytics and optimization projects already underway. Ryan Ziemann, CFO at Sentinel Group, discussed his firm's use of analytics in tackling health care fraud, which he said is a $70 billion problem that adds some $700 to every family's insurance cost every year. IBM started consulting with Sentinel on fraud analytics back in 2003, Ziemann said, and over the last five years the company has doubled its efficiency in spotting fraud, saving its payer customers some $50 million. If Sentinel can predict fraud and deny a bogus claim before it is paid, the payer is in a much better position that it would be trying to recover payments after the fact, he added.

Even more compelling was the testimony of Bill Eimicke, deputy commissioner of the Fire Department of New York, who started out by talking about 9-11-2001, the best day (more than 25,000 people evacuated) and worst day (more than 360 fire fighters killed) in the history of the FDNY. With more than 800,000 buildings in the city, Eimicke said it would be impossible for the department to inspect all the structures in New York and know what to expect when a fire erupts, but the department has a pilot program underway in which it is accessing structural data held by other agencies -- the Department of Buildings, The Department of Housing and many others. The idea is to better predict and prevent incidents rather than relying solely on being a first responder when disaster strikes.

FDNY's work with IBM began after the Deutsche Bank fire of 2007, which killed two fire fighters. It turned out that other city departments and agencies had information that would have helped the FDNY better fight the fire. In fact, access to that data could have helped FDNY predict the risk and prevent the incident altogether.

The next step, said Eimicke, will be rolling out the pilot project across the FDNY in collaboration with a wider network of agencies. One of the biggest challenges, he said, would be changing the culture of the department to focus on prediction and avoidance as well as the traditional role of being the heroic first responder.

"There's no glory in preventing something, but when people die and particularly when members of the FDNY die, that communicates that this is important," said Eimicke. "There's no getting around that it's a dangerous job, but it could be a lot less dangerous."

The stakes may not always be as high as they are for the FDNY, but IBM is banking on huge demand -- across industries and around the globe -- for analytics and optimization services. IBM says the business optimization market will reach $105 billion in hardware, software and services 2009. The market's 7.8% compound annual growth rate is said to be twice that of more larger and more established business automation (applications) market, which IBM puts at $566 billion. Balboni, IBM's GBS practice leader, said banks, public sector agencies, telcos, retailers and utilities have been the first adopters in engaging analytics- and optimization-related services.