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Text mining and real-time applications have improved the accuracy and timeliness of predictive analytics, making it a better bet for businesses. News Story by Robert L. Mitchell

JUNE 13, 2005 (COMPUTERWORLD) - In the movie Minority Report, Tom Cruise's character relies on visions from "precogs," people who can predict crimes, to catch criminals before they can act. While the film takes place in the future, the predictive analytics tool sets available to businesses today are bringing similar scenarios to life.

For example, LoanPerformance uses such tools to help its clients predict which of their customers will be late with payments, which will be lying when they say the check is in the mail and which will be likely to default altogether. The San Francisco-based firm operates a cooperative database of loan payment information for financial institutions. Richard Harmon, senior vice president of scoring and analytic services at LoanPerformance, says its customers, which include mortgage servicers, use the data to encourage on-time payments or to put delinquent accounts on the fast track to foreclosure.

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Successful models can pay off big. At LoanPerformance, a model that predicts which accounts that are 90 days in arrears will default saved one client $2 million in six months. The total cost of deployment was $400,000. Those types of returns are one reason why IDC research shows the sale of predictive analytics tools growing to $3 billion by 2008, which would be a nearly 40% increase from 2004. Such tools make up 25% of the business intelligence market.

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PREDICTIVE ANALYTICS SOFTWARE
Sales in 2004: $2.2B
Share of total core analytics market: 25%
Projected growth rate through 2008: 8%
Source: IDC, January 2004

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