Business Analytics Turns Data Into IntelligenceBy Tony Kontzer | Posted 2012-09-10 Email Print
Re-Thinking HR: What Every CIO Needs to Know About Tomorrow's Workforce
Thanks to the fact that powerful analytics tools have become available to businesses of all sizes, any organization can now turn its data into actionable intelligence.
An Analytics Renaissance
Such efforts to get smarter are a big reason for the renaissance currently under way in the global business analytics market, which grew 14.1 percent during 2011 and is expected to reach $50.7 billion by 2016, according to recent research from IDC.
While the campaign to get a handle on big data is at least partly responsible for this anticipated growth, John Myers, senior business intelligence analyst for research firm Enterprise Management Associates, says most companies haven't actually arrived at a big data issue yet. Rather, the market is being driven by more traditional business goals, such as the desire to fuel top-line revenue growth, reduce costs and replace gut feelings with more informed decisions.
But what Myers believes is most responsible for the growth of the analytics market is the fact that analytics technology, "is bubbling down into smaller organizations so they can take advantage of it," he says. "You have a whole new avenue that's opened up and is available to these users."
Delta Dental of Virginia is a perfect example of this. Having chugged along for nearly 40 years as a small provider of dental health benefits, the company has experienced meteoric growth over the past decade, with annual revenues increasing from less than $20 million to more than $500 million. It now provides benefits to nearly 900,000 subscribers though 4,000 groups.
That growth brought a need for big changes; no longer could Delta Dental run its business by the seat of its pants, says John Sheffield, director of software development. It needed to get much more sophisticated about how it priced and packaged its services, analyzed the competition and monitored claims.
About five years ago, after struggling with a few commercial products that proved too complex, the company came across Pentaho, an open-source analytics solution that Sheffield says allowed Delta Dental to "do the crawl-walk-run thing." The company immediately started pumping data from its transaction system into an analytics model and provided that data to its customers so they could more effectively manage their contracts.
It wasn't long, however, before the company's use of its analytics engine turned inward, and it started using it to study its claims history and determine where provider fraud might be occurring. The resulting tool, developed over nearly a year by Sheffield and the rest of Delta Dental's IT staff, is now used by more than 50 people who manage the company's provider network, and is the subject of a patent application. More importantly, once the company began letting providers know how it was using its analytics capabilities, it began to see what Sheffield dubbed a "sentinel effect."
"We've seen provider submission behavior change radically because of telling them what we're doing," he says. In other words, providers no longer feel they can sneak excessive charges into their invoices.
Meanwhile, the company's underwriters also started using it to refine the pricing of its coverage options, studying transactional data and competitors' pricing in an effort to become more competitive without allowing prices to go too low. They also began using it to analyze brokers, causing a subtle shift toward the brokers who achieved the best outcomes for the business. The result has been a 10 to 15 percent improvement in top-line premiums.
Additionally, after spending about $400,000 on support and consulting services in each of the first few years developing its Pentaho environment, the company has seen its need for customization drop off as the tool's feature set has expanded, enabling it to cut the related annual costs in half.
Now, says Sheffield, "We couldn't run our business without something like this."