Why Is Analytics Such a Hot Market?

NEW HAVEN, Conn. – IBM has dominated the analytics software space, however, a noted venture capitalist says there is much unplowed territory in analytics, making it one of the hottest areas in the technology market.

At an IBM Smarter Education Forum at the Yale School of Management here, Mark Gorenberg, managing director of Hummer Winblad Venture Partners, said he believes analytics to be a driver for the software industry, so much so that “two of our largest successes have been analytics.”

Gorenberg was referring to Arbor Software and Omniture, two companies Hummer Winblad invested in that were steeped in analytics. Arbor Software merged with Hyperion Software to become Hyperion Solutions, which Oracle acquired in 2007 for $3.3 billion. And Adobe acquired Omniture in 2009 for $1.8 billion.

“We believe analytics is the core DNA of software,” Gorenberg said.

Indeed, he also noted that only about 20 percent of enterprises have been penetrated by analytics and that consumers hardly use it at all. Yet, Gorenberg said several trends are emerging that signal the use of analytics in new areas. For instance, many companies are beginning to form a new position in their organizational hierarchy known as the Chief Customer Officer, which relies on analytics to sift through to zero in on how to best meet customer needs.

Meanwhile, despite IBM gobbling up such a big chunk of the market via acquisitions, analytics offers vast opportunity to entrepreneurs, Gorenberg said. In the last five years, IBM has made 25 acquisitions in analytics, investing more than $14 billion.

Yet, Gorenberg said even though analytics is one of the hottest areas in the IT industry now there is no reason to fear that there is a bubble on the horizon that might burst. “Analytics have always been hot, and it’s getting hotter and hotter as there’s more data to be analyzed. I don’t think there’s a bubble coming because there is so much revenue to be made.”

In addition, Gorenberg said there are so many new areas of analytics to pursue, such as personalization, behavioral targeting, and putting cloud, mobile or social spins on analytics solutions.

For his part, Gorenberg said in his view there are three kinds of software: “Software that cuts costs, keeps you out of jail – or helps with compliance, and software that helps you grow revenue. Analytics is the core of software that helps you grow revenue. And because of the revenue it generates and the lift we see, that means it’s got legs to grow going forward. IBM is looking at earning $16 billion from analytics by 2014.”

Rob Ashe, general manager of business analytics at IBM, said that indeed analytics is one of four key growth areas IBM has identified in its 2015 road map and that IBM expects to generate $20 billion in revenue from analytics by 2015.

“I fundamentally believe analytics have always been with us,” Ashe said.

“Analytics is one of those spaces where the best products get a leg up,” Gorenberg said. “It’s a technology-based area. And the early win is the innovation many of these companies do.”

Moreover Gorenberg told eWEEK Hummer Winblad is currently investing in nine analytics companies. “All of them are growing and they’re all doing extremely well. In the history of Hummer, we’ve made money on every analytics investment we’ve made.”

One of the analytics-related companies in the Hummer Winblad portfolio is Crowd Factory, which uses analytics to measure the use of social media, Gorenberg said. Crowd Factory delivers a Software-as-a-Service (SAAS) social media platform to power white-label social network communities. The Crowd Factory social media platform supports social network communities with user profiles, blogs, comments, groups, discussions and photo albums; all completely customizable to create the optimal customer experience.

Another analytics-related company in the Hummer Winblad portfolio is Baynote. Baynote provides personalization and digital marketing optimization solutions that power the adaptive web, an emerging standard in customer experience that is always personal, relevant and convenient. By observing engagement patterns among like-minded individuals to understand user intent, the Baynote Adaptive Web Suite automatically optimizes and adapts the online experience, leading to increased conversions, revenue and loyalty.

Karmasphere, which specializes in analytics, also is in Hummer Winblad’s camp. Karmasphere is a Big Data intelligence software company bringing Apache Hadoop power to developers and analysts. Karmasphere enables companies to unlock the competitive advantages within their large datasets by providing an easy-to-use family of desktop-based software. Karmasphere’s products, built around the Karmasphere Application Framework, feature independence across any Hadoop environment, easy one-click deployment across any cloud/cluster, and a rich and friendly user-interface to maximize productivity, discovery and insight.

And two other of the nine analytics-related companies under Hummer Winblad’s realm are Ace Metrix and SignalDemand. Ace Metrix delivers in market, on-demand television advertising analytics. The SAAS delivers a unique approach to measuring the creative effectiveness of in-market television advertising using a patent-pending measurement methodology. Ace Metrix’s innovative approach can deliver analytics for breaking TV ads as well as pre-media launch ads within 24-48 hours.

SignalDemand provides producers, manufacturers, distributors and retailers with on-demand software and services to maximize profit margins in the face of volatile markets and increasingly complex pricing, mix and supply decisions. Using patented, comprehensive mathematical models to process thousands of variables, SignalDemand delivers real-time price and margin recommendations on a continual basis.