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Analytics Magazine

Quick Guide to Buying Analytics

September/October 2010

A good fit: How to find the vendor that’s right for you and how to work with them to make the project a success.

Brian LewisBy Brian Lewis

The use of advanced analytics has become an essential component of modern business management. Whether you are just starting to explore what analytics can do for you or have long established analytics processes, at some point you may require external analytics software and services. There is an active community of software companies and consulting firms that can help you maximize the value that analytics can bring to your organization. This article is quick guide to finding and working with these analytics vendors.

Deciding If You Need an Analytics Vendor

The Science Of Better website is a community-oriented site for analytics professionals involved in operations research (O.R.), the discipline of applying advanced analytical methods to help make better decisions. The site lists five signs that indicate that you might benefit from analytics. In brief, these signs are:

  1. You face complex decisions.
  2. You’re having problems with processes.
  3. You’re troubled by risk.
  4. Your organization is not making the most of your data.
  5. You need to beat stiff competition.

If at least one of these relates to your problem, then some form of analytics can probably help.

If your organization has internal analytics professionals, you should talk to them first about your problem. They should be able to tell you if it can be solved in-house using existing resources. If you don’t have access to internal analytics professionals or if they decide they need or want external help, then you need an analytics vendor.

Do your best to articulate your problem and start talking with an analytics professional as soon as you have a basic problem definition. Spoiler alert: The problem you think you want to solve is often not the problem you really need to solve. Michael Kubica, president of Applied Quantitative Sciences, a firm that specializes in assisting life science and healthcare delivery systems make decisions under conditions of complexity and uncertainty, explains that companies initially do their best to articulate their problems and desired solutions using the language and approaches that they know. It is then the job of the analytics professional to listen to the company and guide them in this articulation, offering new language and new approaches when necessary.

You also need to come up with a basic definition of your desired solution. Joachim Schwarzkopf, a senior portfolio manager at a Fortune 200 pharmaceutical company, worked with me at Vanguard Software on a project to forecast and optimize the performance of their R&D project portfolio. His advice to companies is to have a clear idea upfront of what you want as a solution despite the fact that new ideas and changes will pop up during the project. Do you want a team of consultants to review your problem and write a report of their recommendations? Do you want an off-the-shelf software that you can use to build your own models and run your own analyses? Do you want a custom-developed model or software solution? Do you want a one-off solution or an ongoing consulting relationship? Knowing what you want can help anchor the discussion with your analytics vendor.

Remember that analytics vendors have the benefit of having worked on hundreds of projects. They have probably seen similar problems to yours and therefore have the experience to guide your problem and solution definitions. Be open to this guidance. See where it takes your project. Sometimes, the final project scope is drastically different than the original. The last thing you want is to waste a lot of time and resources early in the project getting executive approval for a solution, getting a budget authorized, assembling a team, etc. before you know what that solution should really look like.

Finding an Analytics Vendor

Now that you have decided that you need an analytics vendor, how do you find one? One analytics manager I talked with says that companies should do as thorough a job as possible on vendor selection.

You first reaction is probably to Google something. Maybe “supply chain optimization” or “forecasting software.” This is not a bad start and you will quickly find a range of vendors just through the natural search results. Definitely spend the time looking beyond the first few pages of results. Search engines are not perfect and great vendors don’t always make it to the top. Don’t be afraid of the Pay-Per-Click (PPC) ads that appear around the natural search results. Vendors pay good money for these ads and clicking through to their site costs you nothing.

Besides Web searches, a number of online resources for finding analytics vendors can be found on sites like Science of Better, O.R. Champions, Intelligent Enterprise and many others.

Talk to vendors at analytics conferences such as INFORMS. Pitch your problem and see what they can do for you. Don’t be shy. Vendors exhibit at conferences to be a resource for you. Treat these conversations as free, mini-consulting sessions. We vendors hope that you’ll like what we have to say about solving your problem. It’s no secret that we hope you’ll like it so much that you’ll actually want to pay us for our software and/or services. But if not, just thank us for our time and walk away. You won’t hurt our feelings. You can even take a free cookie, candy, pen or other random doodad with our logo on it. As an analytics professional myself working for an analytics software and services vendor, I can tell you that we just enjoy “talking shop.”

Ask your professional network directly or through your LinkedIn groups about analytics software and services. Find out who they work with on their projects and what software products they use. See what they like and what they dislike. Since your contacts have little incentive to “sell” one vendor over another, I tend to value personal references a great deal.

Selecting an Analytics Vendor

Kathy Lange, senior director of SAS Analytical Consulting, says the following on this subject: “If you are looking for the best company to provide analytics software and services, my advice is to keep the big picture in mind as you choose. Start by assessing the overall fit of the vendor with your company considering the relationship you want to have with that vendor. Consider the quality of the software, the savvy of the services team, the reputation for technical support. You’ll appreciate using proven solutions as you are tasked with making the right decisions.”

A key part of Lange’s advice, repeated by both analytics vendors and the companies working with them, is to find a vendor that is a good fit. The definition of “good fit” will of course vary from company to company. The following adapted list from the Science of Better Web site gives you an idea of what to consider when evaluating whether an analytics vendor is a good fit for you.

Does the vendor have:

  • Experience in your industry, shown by references and customer case studies?
  • Experience working with specific challenges similar to yours?
  • General experience in analytics practice?
  • Knowledge of innovative and cutting-edge approaches, processes and modeling techniques?
  • Knowledge of established best practices for your industry, application area or problem type?
  • General-purpose modeling tools or specialized software solutions that can help solve your problem?
  • External recognition and awards?

Remember that you are in control of the evaluation process. If you do not like a vendor’s proposed solution, your interactions with them, their software and services model, or anything else for that matter, move on to another vendor. There are plenty of vendors that will want to help you.

Working with an Analytics Vendor

To formally define your relationship with your analytics vendor, you need a contract or agreement. If you are purchasing an off-the-shelf software product, the agreement is usually quite simple. You agree to buy the software at a specific price subject to specific licensing terms. For more involved projects, you should consider the following key contract elements:

  • Clear description of the assignment (Statement of Work);
  • Responsibilities of the analytics vendor and of your organization;
  • Deliverable materials – content, format, level of detail;
  • Schedule for both the analytics vendor and your organization, including project milestones;
  • Project risks (if any) agreed upon by the analytics vendor and your organization;
  • Fees (time and materials vs. fixed cost); and
  • Change-control procedures.

The statement of work is usually the most challenging to formalize. You might be able to define the work that you want your analytics vendor to complete in excruciating detail. In this case you will have a very clear statement of work. However, this is not the norm. Consider splitting your project into two phases. Use Phase 1 to scope the project and write a detailed statement of work, and use Phase 2 to execute that statement of work.

Be sure the agreement includes a project plan with milestones and interim deliverables. Reaching milestones and implementing interim deliverables not only keep the project on track, they are important sources of motivation and, dare I say, fun. Everyone likes to finally see a scrubbed and structured data set, see an algorithm run for the first time or pull up the first Web-based analysis report.

An important theme that emerged from my conversations was about data. Alan Kosansky, president of Profit Point, a supply chain and optimization consulting company, best explained one of the biggest challenges of a project when he said, “Data, data, data. Getting accurate data that everyone in the customer organization believes and is willing to make decisions from.” Companies have no shortage of data what with all their enterprise databases, ERP systems, business intelligence systems and so on. It is no small task to determine the right data to use in a project and then to extract, structure and clean that data. Make sure you give your vendor access to the appropriate data managers and IT support staff to get and work with your data.

Regular interaction and exchange of ideas between your internal project team and your vendor promotes a dynamic solution. Joachim Schwarzkopf explains that an important factor to ensuring a project’s success is iterative knowledge gain about the possibilities of a solution. You should regularly reevaluate your solution during the project and make any changes you all agree will improve the end result.

Ending the Project

At some point, your project ends and the final solution is delivered. Reports are presented. Software is installed. Models are run. Decisions are made. Over time, you will determine if the project was a success.

Some projects are more easily evaluated than others, for example operational optimization projects for production scheduling, supply chain design and transportation planning. These projects generally have clear before and after scenarios that can be compared. You might be able to say that you saved $2 million per year in transportation costs as a result of a new logistics optimization model. Other projects are more difficult to evaluate such as those for strategic planning, risk analysis or new product forecasting. Quite often calculating a demonstrable ROI for these types of projects is simply not possible, and the best you can say is that you feel more confident in your decision-making ability. Having talked with many business executives throughout many projects, confidence is crucial. And in the end, the value of a project is in the eye of the beholder.

I think a great way to know whether or not your project was a success is described by Kathy Lange. She says, “I think the best part of the project is when the client calls you back to do another project. At that point, you know you’ve really helped them solve their problem and built a trusted relationship.”

This is the so-called “win-win situation,” and you can’t beat that.

Brian Lewis, Ph.D., is vice president of Professional Services at Vanguard Software. He can be reached at +1-919-859-4101 or brian.lewis@vanguardsw.com.

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