Predictive Analytics Meets BPM

Most companies focus on the past and present simply because that's all their technology allows them to do. BI tools generally provide little or no insight into the future. And in the quest to supercharge results and embrace business performance management (BPM), that's simply not good enough.

That's why many organizations are turning to predictive analytics. Predictive analytics capabilities, which are being incorporated into software products that generally fall into the categories of BI or BPM, allow an organization to run highly detailed simulations and develop appropriate strategies to execute throughout operational areas as well as within the finance function.

Here's how predictive analytics works. An application scans data sets and examines patterns that relate to successes and failures. Then, if sales dip below a prescribed threshold or the company exceeds its budget, the software not only pinpoints the specific problem, it sifts through the data to find contributing factors. Once the system identifies key issues, it analyzes an ongoing stream of operational and transactional data to provide alerts and insights.

Using a graphical dashboard, a predictive analytics application displays the probable impact of various scenarios. Not only does the software track how KPIs mesh with other metrics, they show how all these factors drive business processes. As a result, it's possible to notify managers about emerging issues and problems early on so that they can make quick adjustments. No less important: The system ensures that all managers abide by the same set of standards, and it can suggest a course of action based on previous circumstances and results.

Not surprisingly, numerous software vendors have streamed into the predictive analytics market. Several companies that have traditionally offered BI and BPM products, including Cognos Inc., Hyperion Solutions Corp. and SAS, have expanded into predictive analytics. Others, such as SPSS, continue to expand capabilities. Meanwhile, OutlookSoft Corp. has introduced a unified predictive performance management product that offers built-in strategic planning, budgeting, forecasting, statutory consolidation, reporting and KPI analysis. It is designed to deliver actionable information to the desktop and provide a complete view of the business.