Yesterday SAP announced its intention to acquire KXEN, a provider of predictive analytics technology, for an undisclosed amount. KXEN was founded in 1998, is based in San Francisco and has around 500 customers including the Bank of America, Barclays, Overstock.com and Sears.
My first reaction to SAP’s acquisition announcement was ‘about time really’. While SAP catapulted itself headlong into the BI and performance management market with its 2007 acquisition of Business Objects, it never really had a strong predictive analytics story to tell. Instead under SAP’s ownership Business Objects continued to support predictive analytics by partnering with third party players – most notably SPSS. However when competitor IBM swooped down and bought the company for $1.2 billion in 2009 and other vendors starting snapping up smaller players (such as TIBCO, which bought Insightful; and Pitney Bowes, which acquired Portrait Software) SAP’s analytics story started to look a little shaky.
In the intervening years (and as we have written about before) SAP made an even bigger push into in-memory computing and big data with its HANA platform. More recently though, the company returned its focus to predictive analytics with the release in late 2012 of SAP Predictive Analysis. As we documented here the offering provided a lightweight statistical analysis and data mining tool, designed for building more simplistic models—with advanced analytic functionality supplemented through R language extensions, or by tapping into HANA’s predictive analytic library for in-database analytics. This meant that there was still a gap for a more comprehensive predictive analytics business oriented tool in its portfolio; a gap that can now be filled with the KXEN acquisition.
SAP is however a latecomer to the predictive analytics party, and it’s a surprise to some that it took the company this long before choosing KXEN. SAP joins at a time when the predictive analytics market is hotting up, driven in a large part by the opportunities opened up by big data. Especially as more and more organisations look to drive value from the increasing volumes and variety of data they have at their disposal and apply analytics to it to help predict customer behaviour, spot opportunities ahead of the competition and respond to changing business conditions.
So what exactly does KXEN bring to the analytics table? Well KXEN provides support for a range of predictive analytic functions, but in contrast with other vendors it has looked to differentiate its offering by targeting business users who want a more self service approach to predictive analytics rather than going after a traditional advanced user audience (such as IT developers and statisticians). In particular the toolset has been built to automate many of the time-consuming and repetitive tasks involved in predictive modeling—such as preparing analytical data, selecting algorithms, testing and fine-tuning analytic models—allowing a broader base of users to take advantage of its predictive techniques. Likewise its API is often used to integrate the technology with existing applications and processes, making it tried and tested when it comes to interoperability with e-commerce platforms and content management systems, for example.
In recent times the company has also launched a number of applications designed to target some of the common business use cases of predictive analytics such as customer acquisition, cross sell, up sell and churn management. For example it has an on-premise recommendation app, InfiniteInsight, designed to provide personalised recommendations (like products, content or targeted ads) to customers; there’s also a social app that provides social network analysis capabilities that analyses transactional data to link individuals together and identify communities of people who share the same behaviours. The company also has a cloud based app called Predictive Offers (available via Saleforce’s AppExchange) that aims to personalise inbound customer conversations with a real-time ‘next best activity’ approach.
These capabilities are very much the sweet spot of predictive analytic solutions and will, in certain scenarios, nicely complement the functionally of SAP’s vast tool and application portfolio—especially its CRM suite. The company has already stated it intends to use KXEN technology with Predictive Analysis and its SAP application suite, as well as incorporating it into cloud and on-premise SAP applications built on SAP HANA—including those for Fraud Management, Smart Meter Analytics and the 360 Customer solution.
There’s no doubt that acquiring a predictive analytics vendor will give SAP a more competitive footing against the other big players in this market such as IBM and stalwart SAS. But it’s also a tough battleground, especially as both these players are on a similar trajectory and are, for example, releasing offerings designed to make analytics more usable and accessible to a broader base of users. While acquiring KXEN is, we believe, a necessary move for SAP and fills a much needed gap in its portfolio, it will have its work cut out if it wants to expand and build its credentials in this space at speed.
I am being briefed about the KXEN acquisition by SAP later this week and will add any further insights to this blog as necessary.