Pros, Cons of Spinning Off an Analytics Business

Demand for data and data analytics continues to surge across all industries. As companies develop their own expertise in data analysis, it only makes sense for executives to consider offering analytics services to other businesses.

And a few brand-name companies have already taken the leap.

For example, drawing upon its expertise in forestry sustainability, Weyerhaeuser has created a wholly-owned consulting subsidiary called Weyerhaeuser Solutions that helps companies in the energy, mining, manufacturing, and investment management industries develop, manage, and commercialize forest-based products.

Weyerhaeuser is working with energy companies that must comply with legislation to reduce emissions by either converting their coal-burning plants to biomass or adding biomass as a partial substitute for high-efficiency coal burners.

Weyerhaeuser uses procurement systems data and big data analytics to help energy clients determine where they can source biomass from sustainably-managed forests. Weyerhaeuser also set up its clients’ supply chains at the greatest efficiency and lowest costs.

Other companies whose core business is focused in other industries, such as financial services or retail, are opting to buy into the analytics services business instead of building their practices organically.

Defense contractor Raytheon has recently acquired Visual Analytics Inc., a Maryland-based firm that specializes in data analytics and data visualization. Raytheon, which already handles large data sets and provides actionable information for its customers, plans to leverage Visual Analytics to provide its clients with advanced analytics products and knowledge management systems.

Even Amazon seems to be thinking of offering analytics as a service.

The demand for data analysis services and expertise is clearly on the rise – IDC expects the worldwide business analytics market to reach $50.7 billion in revenue by 2016. But there are significant barriers and challenges that would-be market entrants face.

These include a well-documented shortage of skilled data scientists and other key experts. Of course, firms that are able to recruit and develop the skills needed to meet the rising demand for analytics expertise from other companies position themselves well to make their services more marketable.

Still, companies whose dominant areas of focus lies within a particular industry – such as energy or manufacturing – may be challenged to develop and run analytics services businesses that fall outside their primary areas of expertise due, in part, to strong competition.