Big data and analytics — they almost always seem to go together in the marketing pitch by IT service and consultancy services industries — are the new buzzwords.
Chastened by the severe pressure on profit margins in the last few years, a leading Indian outsourcer for American banks recently decided to “move up the value chain”. Instead of merely moving the banks’ processes related to their mortgage operations to India, the company started by adding an ‘analytical’ layer to its earlier plain vanilla offering by offering to “predict” which of the banks’ potential customers were more likely to actually settle for a loan. The company went a step further by offering risk assessment of the potential clients of the bank. Analytics-based services such as these essentially thrive on their ability to quickly discern “patterns” in masses of data.
‘Shaping’ consumer behaviour
The spam filters in the emails we use, or the way Linkedin decides who we may be interested in, are actually based on algorithms that use analytics that ‘learn’ from our usage of these services. Large corporations, including banks, insurance companies, telecom service providers and hospitals, that have access to data of their users “virtually own their clients,” says Natwar Mall, Senior Vice-President, Fractal Science, Fractal Analytics Ltd., a San Francisco-based company that specialises in big data and analytics.
But companies, even when they have the data, are not using it because they do not analyse what they have, says Mr. Mall. Drawing on Fractal’s “pricing studies” of global FMCG companies, Mr. Mall points out that the most “price-sensitive” markets in the world are not India or China as is commonly understood, but Brazil. “A 1 per cent increase in the price of a product (a common FMCG product such as a shampoo in a sachet, for instance) can result in demand reacting by 4 to 5 per cent in Brazil, compared to just 1 to 2 per cent in countries such as India. “Imagine the pricing power that a Proctor and Gamble or a Unilever would have when they have access to the nuances of markets,” remarks Mr. Mall. He attributes the “excitement” among companies, especially large MNCs, to the possibilities offered by the use of analytics running on silos of ‘big’ data that they have access to. The crux of their interest is how they can “meaningfully shape” consumer decisions by understanding consumer behaviour using the data they have.
But who are the drivers of the state of the art in the field of analytics? “Undoubtedly it is Google, but there are also players such as Amazon and Netflix, who are setting new benchmarks for excellence in this field,” says Mr. Mall. Google’s pre-eminence as a search engine, and the search engine’s web of linkages with the company’s other services, makes Google the past master in the field of analytics. “Google is not a technology company, not an advertising company by virtue of the fact that this generates a significant proportion of its income, but an analytics company,” says Mr. Mall.
Netflix’s success
Why would Netflix, an Internet-based streaming media service, figure among the top analytics companies? Netflix bought the rights to the popular 1970s-era British political drama, House of Cards , and started production for the U.S. market (aired in the U.S. in February 2013). As virtually every household in the U.S. is a Netflix subscriber, the company has access to what viewers’ preferences are, what they watch and for how long. “When Netflix aired House of Cards , they used all the data they had and completely customised the programme,” says Mr. Mall. “Netflix dialled up sex and violence and dialled down a few things, according to what it thought was suitable for the U.S. audience.”
House of Cards thus became one of the most-watched TV shows ever, won several Emmy Awards and Netflix even allowed viewers to download all episodes together if they so wanted. “What Netflix did is what I would call state of the art because they recorded every bit of user data they could get their hands on and used it to sell something,” observes Mr. Mall.
The privacy issue
But do no these things raise worrying issues of users’ privacy? “Absolutely, without a doubt,” says Mr. Mall. Google’s alteration of its privacy policy earlier this year, which results in a unified policy across all its products, implies that user data that is available with YouTube can be shared with Gmail, which in turn can be shared with its search service. “Google has been pushing the boundaries of what is acceptable but we have to see where it settles down,” says Mr. Mall.
Mr. Mall feels Indian IT service companies have clambered onto the analytics bandwagon without paying enough attention to the issue of hiring enough qualified talent. Indian IT companies and consultancies, he says, are telling their clients that as they are already handling their data, they are well placed to handle their analytics business too.
Indian IT companies still see the issue as one of merely scaling up their workforce — a question of just putting more people on the job. Companies such as Wipro have made acquisitions of analytics companies, but most are still struggling, says Mr. Mall. The trick, he says, is to have a workforce with multiple skillsets.
Fractal, he says, has many employees who have majored in physics, “because they understand data better, but we also have people from very diverse fields”. “IT companies are underestimating the complexity of what it takes to build a practice in analytics,” he argues.
