IBM Touts Predictive Analytics as Key Differentiator for Businesses

Vendor showcases successful applications of technology, points to recent study indicating top companies more likely to rely on analytics as competitive and performance differentiator.

December 20, 2010

D.H. Kass

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IBM Corp. is showcasing real life examples of its predictive analytics in action, recently offering up a venerable women’s clothing manufacturer successfully using the technology to help change its fortunes and pointing to its own study indicating that top companies rely on such solutions to separate themselves from competitors.

The vendor said that Bernard Chaus Inc., a $100 million, New York City-based garment maker has adopted IBM’s business analytics technology to help pare costs, clip revenue losses and improve margins.

In the past two years, Chaus, which operates in the hotly competitive women’s apparel industry, has shed about 15 percent in net revenue and, for its fiscal year ended July 3, 2010, lost $5.2 million and cut 27 percent of its workforce, according to its U.S. Securities and Exchange Commission (SEC) 10-K filing. In 2007, the company posted sales of $146.7 million and income of $522,000, both five-year high water marks.

Chaus officials reasoned that by streamlining sales and merchandising and upgrading the company’s ability to tap into timely sales performance data, it could better respond to fluctuations in market demand to boost revenue.

Sky I.T. Group, a New York-based IBM business partner, provided Chaus with SkyPad, its Business-Intelligence-as-a-Service solution, to afford the company weekly, accurate sales information, rather than relying on data previously collected manually. The SkyPad system uses IBM’s DB2 software and its BladeCenter servers.

"Business analytics technology provides tremendous value, especially as we look to expand our global operations," said Ed Eskew, Chaus chief information officer.

"Although merchandise has been already produced for the holiday season, both suppliers and retailers are able to harness the power of business intelligence to get our products off the retail floor faster,” he said.

Sky I.T.’s web-based business analytics solution enables Chaus to monitor the sales performance of individual retailers, identify fast-selling items, adjust pricing, respond on-the-fly to buying trends and compare profit among different stores.

According to company documents, Chaus sells its wares throughout the U.S. to some 4,500 outlets operated by 400 department store chains, specialty retailers and other retail locations. In fiscal 2010, nearly 40 percent of its sales came from TJX Companies, Dillard’s Department Stores and Nordstrom.

Chaus said that Sky I.T.’s business analytics technology has helped reduce its quarterly sales losses associated with marked down inventory by nearly 50 percent in the past year.

Now the company intends to integrate all of its data and link to overseas manufacturing plants to view its entire supply chain down to the smallest detail.

"Real-time insights are helping Bernard Chaus keep its finger on the pulse of the fast moving, fashion industry," said Andy Monshaw, IBM general manager, midmarket business.

Study shows business analytics is competitive difference maker

IBM, which has ponied up some $14 billion to add 24 business analytics companies to its portfolio in the last five years, recently conducted a study of 3,000 executives by its Institute for Business Value and the Massachusetts Institute of Technology’s (MIT) Sloan Management Review, a quarterly research journal, to better understand the segment's trends, rate of adoption, strengths and weaknesses.

According to the study’s findings, top performing companies are three times more likely to use analytics to improve competitive performance and put some distance between themselves and their competitors.

The survey also found that successful companies are five times more likely to apply analytics rather than rely on intuition in making key decisions. Moreover, they are twice as likely to rely on hard data to construct strategies and craft day-top-day operations.

"The correlation between performance and managers who use analytics has important implications for organizations whether they are seeking growth, efficiency, or competitive differentiation," said Fred Balboni, IBM global leader, Business Analytics and Optimization Services.

"This study shows that when organizations use analytics to tackle their biggest challenges, they can overcome seemingly intractable challenges," he said.

Michael S. Hopkins, MIT Sloan Management Review editor-in-chief, said that the study shows that analytics and data create value.

"Interestingly, the top performers also turn out to be the organizations most focused on improving their use of analytics and data, despite the fact that they're already ahead of the adoption curve," said Hopkins.

"We discovered that the more managers know about analytics-driven management—and see how it can create value—the more they know that they want to know more," he said.

Survey participants said that a lack of understand about how to implement analytics to improve their business, and a lack of bandwidth and skills stood in the way of widespread adoption of the technology in their companies.

TAGS: IBM,business intelligence,business analytics,Bernard Chaus,Sky I.T. Group

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