"Predictive analytics helps connect data to effective action by drawing reliable conclusions about current conditions and future events.”

Predictive analytics informs and directs decision making by applying a combination of advanced analytics and decision optimization to an organization’s enterprise data, with the objective of improving business processes to meet specific organization goals.

At any given moment within your organization critical decisions are being made. Decisions that will affect your organization’s ability to generate revenue, control expenses, and manage risk. Decisions that will directly affect your bottom-line. By incorporating predictive analytics into the daily operations, organizations gain control over the decisions made every day, so that they can successfully meet their business goals.

Leading analyst firm IDC (www.idc.com) predicted that the predictive analytics market sector will grow at a compound annual growth rate of 8 percent during the next five years(1).

Predictive analytics offers numerous advantages for organizations that recognize the inherent value locked within their existing enterprise data. Strategically, predictive analytics provides a quantitative foundation for rapidly identifying, objectively evaluating, and confidently pursuing new opportunities. Tactically, predictive analytics identifies precisely whom to target, how to reach them, when to make contact, and what messages should be communicated.

Prediction makes a difference

IDC recently published a follow-up report to its extensive study of the business use of analytic technologies. For this study, IDC surveyed more than 40 North American and European companies. All of them had used an analytic application for at least six months.

The study included organizations using predictive business analytics—defined as either data mining technologies or packaged applications incorporating these technologies—and organizations using non-predictive technologies—defined as business intelligence solutions such as end-user query, reporting, and analytic tools.

In this report (2), IDC examined the differences between applications of predictive and non-predictive solutions. Key findings included:

n The benefits of predictive analytics projects centered on business process enhancement, that is, using information to drive optimal decision making.

n Predictive analytics projects required higher investment levels and yielded significantly higher overall returns over five years, implying that these projects tackled problems of greater scope and complexity.

n While non-predictive projects yielded a median return on investment (ROI) of 89 percent, predictive projects resulted in a median ROI of 145 percent.

(1) Source: Worldwide End-User Business Analytics 2004-2008 Forecast: Core Versus Predictive, IDC #32642, December 2004.
(2) Source: IDC, Predictive Analytics and ROI: Lessons from IDC's Financial Impact Study, 2003. September 2003, document number #30080.