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Datamining: Another opportunity - Views on News from Equitymaster
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  • Dec 4, 2000

    Datamining: Another opportunity

    Today, the race is to get business e-enabled. That is managing the two sides of your value chain, which includes supply chain and at the other end customers, electronically over a private or a public network (Internet). Organisations now have GBs and GBs of data. The difference between the smart and the not so smart ones is how they put this data to use. Those who are smart use the data to look into the future. Others just generate reports, heaps and heaps, that never make any sense.

    Datamining is recognizing relationships in the data that has been collected, which will help predicting how the numbers will be in the future. A good example is a supermarket that has electronically captured all the purchases of its customers. It can study the buying pattern and arrange products, which are usually bought together, next to each other. A study revealed that often customers bought noodles and ketchup together. So keeping ketchup near to the noodles is a subtle way of reminding customers that they may want to buy ketchup. The bottomline is that it does help. Datamining has been around for some time, mostly as a concept. But with understanding of the subject getting better it is rapidly gaining acceptance amongst the corporates.

    The biggest advantage that Datamining gives to an organisation is that it helps the organisation move faster than others. One organisation sensed that the server markets were picking up in Europe using Datamining. It prepared by shipping servers to Europe and it was the only one who could meet the demand when the orders finally started coming in. The marketing community can use Datamining to determine potential targets.

    E-business is major market today for Indian software companies. For Infosys, it accounts for about 30% of the revenues. E- business contributes roughly 20% of Wiproís Global IT division. This is the bread and butter of many Indian companies. The opportunity is so vast that even hardcore technology companies like Hughes software have got into this market.

    When we talk of an e-business solution we must keep in mind that we are not just talking about selling and buying over the Internet. Itís a whole new world. Apart from systems integration (where the CRM and SCM solutions are interfaced with the ERP), where the service differentiation comes in, is the capability to provide Datamining solutions to the organisations. Only a couple of companies including Wipro have known capabilities in this area. One interesting point to note is that, as of now Indian companies do not offer any Datamining products like Cognos or Informatica but only implement them. The Indian software companies integrate these softwares with the e-business solutions provided by them.

    Another area that opens up is the market for Datamining products. A lot of research is being done to develop methodology for analysis of data using neural network, genetic algorithms, decision trees, nearest neighbour methods and so on. This market to is very nascent and a lot of work is being done.

    (Rs in bn) FY98 FY08 CAGR
    IT services 98 1,790 33.8%
    Software products 28 907 41.6%
    IT enabled services 19 884 47.1%
    E-business 9 465 47.9%
    Total 153 4,046 38.7%

    The ability to provide solutions and services that help CEOís make more qualified decisions, will make the smart software companies stand out from the crowd. And it is this need that Indian software companies should exploit. This is almost equivalent to strategic consulting and therefore, highly value added. This translates into higher billing rates and profits. Taking up a challenge like this is tough, but as they say when the going gets tough, the tough get going.



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