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Alphablox spreads the analytics gospel

Alphablox sees a big future in analytics. But so far the use of analytical tools has been restricted to a business's information technology analysts.

LONDON -- As traditional business intelligence (BI) software firms are having difficulty expanding their products...

beyond the IT department to a wider business market, privately held analytics vendor Alphablox thinks the component-based Java Web server architecture of its InLine Analytics offering is coming fully into its own.

"The potential for analytics is as big as for any software area ever -- it should be a multibillion-dollar industry," says Michael Skok, founder and chairman of the Mountain View, California-based Alphablox.

But the reality is that the use of these kind of tools is currently restricted to an enterprise's IT analysts. This, in turn, restricts the use of data analytics to little more than 1% of the entire enterprise software market. The largest analytics vendor, Hyperion, for instance, turns over about half a billion dollars a year.

But the recent efforts from a host of BI and customer relationship management software vendors -- as well as from database and data-warehousing vendors such as IBM, Oracle and NCR -- to spread the appeal of analytics beyond the IT department has prompted industry analysts to identify analytics as one of the most significant growth areas in the enterprise software sector over the coming years. IDC predicts the market for analytic software will exceed $16 billion by 2003.

Despite their protestations to the contrary, long-standing BI vendors Cognos, Business Objects and Brio are still suffering from the fact that their data analysis products were originally designed to analyze data from a single source.

The buzz in the analytics applications and tools market is around using the products to analyze customer data, but a company cannot really measure the profitability of customers unless they also analyze how much those customers cost. This requires information from an enterprise's project systems, supply chain systems, legacy systems and accounting systems. The BI vendors are adapting to this need, but far more slowly than they would have analysts and customers believe.

Alphablox claims to have already incorporated the ability for its analytics software to access multiple data sources. Skok says that because Alphablox's analytics are integrated into customers' business processes, the tools can provide 'real time' information for frontline managers to make decisions about the profitability of their employees' actions when needed, rather than waiting for belated profitability analysis from the specialist analysts for whom these tools have typically been designed.

By making its analytics part of the standard Internet IT infrastructure, Alphablox claims that they can be reused across all transactional applications. 'Old-world' analytics have tended to reside in two relatively isolated places: in the transactional applications (ERP, SCM, CRM) and the BI tools themselves, where the focus is on the productivity of a particular department or function; and in the data warehouse, where IT applies analytics to multidimensional data or data marts.

Still, Alphablox has to prepare itself for the fact that BI vendor Cognos is due to release at the end of this year or the beginning of next an integrated product suite to provide an enterprise view of an organization from a number of perspectives. Close competitor Business Objects has also been making a lot of noise in this area, and has dedicated an entire business division to analytics. Aside from its head start and open architecture, Alphablox hopes its partnerships with systems integrators such as PwC, KPMG, Arthur Andersen and smaller SIs focused on certain industry verticals will help it compete effectively against bigger rivals.

Alphablox has already raised $100m in capital from private investors as well as from customers in financial services, telecommunications and manufacturing that see value in analyzing the profitability of their actions as they take place. Customer Deutsche Bank has invested a total of $33m in Alphablox, for instance.

Currently, Alphablox has about 100 customers, and its average deal size is about $250,000, according to Skok.

"Everyone is trying to mitigate against risk in this climate," says Skok. "The company is in a position to be profitable, with tens of millions in the bank -- we do not need to go public or ask for more money."

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