Business intelligence (BI) software giant SAS last week continued its push into the business performance management (BPM) space, unveiling two new suites designed to help firms optimise profitability and better manage analytical models assessing future performance.
SAS Profitability Management suite is due to launch before the end of the year. It is designed to offer executives an overview of the profitability of individual products, customers, channels or branches, as well as the drivers impacting that profitability.
At its annual Better Management Live event in Las Vegas, SAS said that visibility over granular customer data, coupled with the ability to predict the future profitability of an individual customer using analytical tools, would let managers target the most profitable customers.
"Many firms believe a customer or customer set is their most profitable when in fact it is not," said Russ Cobb, director of product marketing at SAS. "The problem is they haven't had that granular data and have often seen revenue as synonymous with profits."
The move mirrors similar plans from BI rival Business Objects, which bolstered its credentials in the profit management space earlier this month with the acquisition of activity based costing (ABC) specialist ALG.
Speaking at SAS’s North Carolina headquarters ahead of the conference, the firm’s strategist, Gary Cokins, said the profitability management functionality builds on existing ABC tools for calculating the cost of individual products or services.
"The expansion in the number of product lines at many companies has created complexities that create more indirect expenses for each product," Cokins said. "Traditional accounting approaches that average out the cost of producing a product can't cope so you need ABC functionality that costs each part of the production process."
However, Cokins pointed out that such tools tend to only be used by the finance department. He added that incorporating revenue as well as cost information to calculate the profitability of individual products or customers would broaden the new suite's appeal to business executives.
The functionality offers firms major competitive benefits, according to Cokins. "Firms are realising it is not about growing sales, it's about growing profitability," he said. "[Profitability management] allows the chief finance officer and chief marketing officer to work together to target the most profitable customers."
Separately, SAS announced it would ship a new predictive analytics software suite next month. The product is designed to handle the large numbers of analytical models predicting future performance that many companies run to support decision-making processes. SAS Model Manager aims to limit the use of outdated or inaccurate models by managing the full model lifecycle, including development, testing, publishing and retirement, the company said.
"The value of an analytical model could be to predict how a customer will react to an offer," said Cobb. "But if the model was based on old data you could end up offering an offer to a customer you don't want anymore. Model Manager gives the IT department a central point to test if a model is beginning to age and needs retiring."
The new products were unveiled as SAS released the results of a study suggesting that failure to deploy analytical tools for assessing business performance was contributing to the high failure rates of many BPM projects. The survey of 1,100 executives found that while spending on BPM initiatives is expected to grow by more than 10 percent next year, around 40 percent of projects are failing to meet their initial objectives.
Respondents identified cultural factors, such as a lack of executive support or poor cross-departmental communication, as the main factor contributing to high BPM project failure rates. But Cobb said that the research also showed a correlation between successful projects and those that incorporated analytical functionality capable not just reporting on current performance but also modeling the impact of future business decisions on performance.
"Analytics is very important if you want to move from managing your performance to actually improving your performance," Cobb said. "[The survey shows] companies that use analytics far outperform those that don’t when it comes to meeting their performance management objectives."
Tom Davenport, an academic and writer from Babson College specialising in BI, agreed that analytical functionality was delivering firms a competitive advantage. He cited both Tesco and Barclays as examples of firms that had seen a major improvement in performance as a result of automatically analysing individual customers in order to better tailor their activities. "There are industries such as the airline sector where analytics haven’t proved that successful but the general rule is that the more analytical firms are, the more successful they were," he added.
