SAP Acquires KXEN to Extend Power of Predictive Analytics to 'Unlock Big Data'

By Peter Bernstein September 10, 2013

So here is a somewhat rhetorical question for you: How would you like to be able to relatively accurately predict the future? Is this wishful thinking, or can the focus today of using big data in combination with the emerging field of predictive analytics really narrow the odds?

When it comes to our personal lives, accurately predicting the future is likely to remain the in domain of psychics. However, for businesses, being able to get a reasonably good forward looking handle on customer buying proclivities is to put it mildly, serious business. Indeed, with the growth of interest in big data for finding insights that can be gained from cross-functional correlations of increasingly large customer profiles, it has not been surprising that the area of predictive analytics is growing almost in lockstep.

After all, we are talking about not mere millions but billions of dollars to be won or lost. This is purely a case of using data to find and close customers before the other guy beats you to them and possibly locks you out of future sales.   


Image via Shutterstock

For this reason, it is not surprising that SAP, which has long been in the customer relationship management and now customer experience field, has like the rest of us been watching the progress being made by a slew of interesting predictive analytics companies. In fact, even though SAP is already a player in the roughly $2 billion predictive analytics market which is predicted to grow to $3 billion by 2017. It found a company it believes is doing a nice job pushing the envelope, privately held San Francisco, Calif.-based KXEN, and has announced its intention to purchase it with closing set for the end of 2013.       

A combination that wants to work hard on your future

SAP envisions the acquisition helping enterprise line-of-business (LOB) users and company analysts get it right ahead of time. They state, “The combination of KXEN with the advanced analytics, agile visualization and enterprise business intelligence capabilities from SAP, along with the SAP HANA platform is intended to help companies to harness big data, engage users across the enterprise and aims to execute before their competitors to gain advantages they never thought possible.” 

What KXEN does is extends the reach of predictive analytics tools beyond just the data scientists and puts them in the hands of those on the front lines and those mapping strategic as well as tactical moves. It does so by automating key modeling and analytical tasks and enabling faster deployment and adoption.

“With increased demand for actionable insights from ever-growing volumes of data, broader access to predictive analytics is key,” said Henry Morris, senior vice president for Worldwide Software and Services Research, IDC. “KXEN supports this objective by moving predictive analytics into the cloud and inside of the enterprise applications most popular with end users.”

KXEN will complement SAP’s existing advanced analytics including SAP Predictive Analysis software, a workbench for defining, executing and visualizing predictive analysis.

Where predictive analytics is valuable

While predicting sales possibilities is an obvious use of predictive analytic solutions, there is a growing recognition that such tools of much more extensive value for enterprises. SAP believes for example that predictive technology can enhance the value of core SAP applications for managing operations, customer relationships, supply chains, risk and fraud. They also explained that they plan to incorporate KXEN technology into cloud and on-premise SAP applications built on SAP HANA, including the:

  • SAP Fraud Management analytic application
  • SAP Smart Meter Analytics software
  • SAP 360 Customer solution

Just so you understand why big data is called big and the context for this acquisition, SAP wants to help customers use predictive analytics and data mining to make better decisions on petabytes of big data. SAP is also on record as saying that directionally the acquisition will allow SAP to introduce new predictive capabilities to the portfolio of solutions for more than 25 industries, particularly data-intensive vertical industries such as telecommunications, retail, consumer products, manufacturing and financial services.

“The compelling combination of KXEN with market-leading analytics and business intelligence solutions from SAP intends to deliver the capability organizations need to innovate for growth in high-volume data environments,” said Michael Reh, executive vice president of Business Information Technology, Products & Innovation, SAP. “Just as SAP is revolutionizing visualization, KXEN will allow us to bring predictive analytics to more business users, enabling easier-to-adopt solutions and the delivery of greater value via SAP solutions.”

Automating the process of generating and executing on valuable insights

The description of what KXEN does gives insights into why SAP decided to acquire it rather than license the capabilities. KXEN’s predictive analytic tools and applications automate the end-to-end modeling process which they say demonstrably increases highly accurate and robust predictive models. It does so according to the company by replacing the classic model creation process, which is manual, repetitive and prone to human errors. The company’s characterization of its capabilities reads: “KXEN’s flagship product, InfiniteInsight, is able to deliver orders of magnitude improvements in speed and agility to optimize steps in the customer life cycle – including acquisition, cross-sell, up-sell, recommendation, retention and next-best activity, as well as across the business for risk, fraud and operations.”

“We are excited to integrate our leading predictive analytics capabilities with market-leading enterprise BI and agile visualization platforms from SAP, which we expect will result in unmatched analytics breadth and depth in the marketplace,” said John Ball, CEO of KXEN. “Our customers were increasingly asking us to focus on predictive applications that could be easily consumed by the business, both in the cloud and on premise. The real-time big data capabilities of SAP HANA make it the ideal platform to deliver on this vision.”

KXEN is no stranger to large enterprises around the world, which certainly was another big attraction for SAP, who no doubt has experience in many if not most of the KXEN accounts. KXEN’s 500 deployments include the likes of AAA, Allegro, Bank of America, Barclays, Belgacom, CBS Interactive, ING Direct, Lowe’s, Meredith Corporation, Mobilink, Overstock.com, PT XL Axiata, RealNetworks, Rhapsody, Rockwell, Rogers, Sears, Shutterfly, Stage Stores, U.S. Cellular and Vodafone.

In fact, the list shows the significance of why predictive analytics is becoming a valuable tool. These are all large entities generating enormous volumes of not just straight transactional data but in fact petabytes of associated customer profile information from which valuable insights can be gleaned. The trick obviously is to not just mine the data and analyze but turn into the information into “actionable insights” as quickly as possible. The challenge of being actionable from a risk reward standpoint is very much a function of predictive accuracy. It is the reason companies in this space who seem to get it right often are going to command a premium going forward—a prediction which while done manually by me should hold up over time.




Edited by Alisen Downey
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