This is the first of several blog posts that look at the use of analytics consultants and when consulting firms should use analytics consultants.
Throughout the corporate world analytics is a necessary capability for a data-driven enterprise. But what types of analytics should be done internally and when should you rely on external capabilities?
An enterprise can address its analytics capabilities in several different ways. The decision to hire internally is usually associated with how often analysis needs to occur and how central to the company’s operations the analytics are. Although the capacity is needed, there is a shortage of talent that is leading many companies attempting to develop talent internally through training. However, even if a company is able to hire and retain talented analysts, it is likely they still do not have enough people, time and resources to address all their analytic projects. My assumption is that most companies will have at least one person with advanced analytics and/or data science training. It is incumbent upon that person to work with a senior executive like a CMO to identify the possible analytics projects and determine how to address them based on how critical a project is, how often the analysis needs to occur, and whether the analysis is strategic or operational. Based on their internal skillsets, they’ll determine how best to conduct the analysis. At that time, a decision can be made about the mix of 1) internal resources, 2) software and 3) outside consultants that can be used to complete the analytics project.
Recommendation: All mid- and large-size enterprises should hire someone that can evaluate the efficacy of different analytic projects. In the short-term, they can work with a third-part advisor like Experfy to determine what goals are attainable and how to execute on different types of analysis.
How Different Types of Analysis Fits Into the Decision
Descriptive analytics are more likely to be kept internally because 1) they are easier to do and 2) monitoring is needed on an ongoing basis. For analysis of their operations, companies usually already have descriptive analytics capabilities in their existing business intelligence software. In addition, predictive capabilities are being added to the latest editions of many BI tools.
The development of predictive KPIs is one of the hottest areas of analytics. In this area, there are now companies that sell SaaS-type products that specialize in specific types of activities (e.g., advertising) or an industry vertical. For the remainder of predictive capabilities, enterprises will struggle to provide them internally because they require a variety of analytic techniques and/or better internal data governance capabilities.
Most companies are loath to outsource their strategy, which is where most prescriptive analytics come into play. That being said, outside consultants may be called in when a company does not have the internal skillsets to do a large one-off analysis, in addition to the other times when senior executives want an independent opinion.
Figure 1: Types of Analytics
So far, we’ve determined that enterprises are more likely to need outside help with predictive and prescriptive analytics that are not conducted on a regular basis. In addition, companies are likely to look to outside help if they need a specialized skill to complete a project. In general, there are three common scenarios where a consulting company will be hired:
- An enterprise is resource constrained in terms of both time and manpower.
- There is a lack of required skill sets within the company. For example, someone who knows how to use SPSS and do regression analysis may not be have advance math background or using techniques associated with machine learning. Or, an analyst may do most of his or her work using Excel but needs to use more advanced, database and Big Data tools (i.e., Hadoop, NoSQL, Spark).
- A person is being entrepreneurial and is trying to solve a problem without going through corporate bureaucracy. These cases are similar to those in which people make “shadow IT” purchases.
If the decision to get external help has been made, how will that manifest itself? In those cases where the decision is made to use an analytics consultant, there are many choices available, but in general they can be classified as:
- Individual: If the only need is to find someone who knows how to conduct a specific type of analysis, then it makes sense to identify an individual to hire long-term or to contract with someone with a specific skill-set.
- Analytics Firm: Companies like Mu Sigma and Silicon Valley Data Science focus exclusively on providing analytics services. They generally claim to have a broad base of services and the ability to help a client through the lifecycle of an analytics project. When evaluating these firms, make sure to understand that they likely specialize in certain types of analysis using a preferred set of technologies. And there are many to choose from – based on a report by Scry Analytics, there are 187 firms and divisions of firms doing data analytics just in India.
- Management Consultant: These companies are not analytics specialists. Yet, they often provide analytic services. The larger firms like McKinsey will have in-house capabilities to provide strategic insights based on your company’s data. Other firms that concentrate more on day-to-day operations will also offer analytics services that focus more on implementing tools. Smaller consulting firms will often be used because of their expertise in an industry vertical.
- Technology Vendor Providing Analytics: There are many software tools that offer analytics. For example, Tableau and Qlik provide data discovery tools that can be used to manage KPIs. In addition to their software, these companies often offer related professional and consulting services.
Recommendations:
- If your company needs ongoing analytics support, then using a pure-play analytics firm makes sense.
- In cases where your company is trying to operationalize descriptive analytics, then it makes sense to look towards technology solutions, either via a software product or via a systems integrator that can do the implementation.
- If the demand for analysis is being driven by the desire to do a strategic reassessment, then it makes sense to look towards management consultants that specialize in that.
So, now that you have identified if you need outside consulting support and what types of providers are available, how do you find and evaluate them? In order to facilitate an easy hiring process you may want to look at a consulting firm that with a pre-existing relationship with your company. However, if you care about doing your due diligence, you will likely have to review the services offered by many pure-play analytics providers. In these cases, your organization needs the internal capability to write a detailed request for proposal. An alternative to this approach would be to use Experfy the same way other companies use advisory firms such as Alsbridge to help them select and manage outsourcing relationships.