Big Data, Big Business

The region scored a key win with IBM’s new analytics center. Now, the focus is on training workers and building on existing IT success.

By
From the May 2013 issue of Columbus CEO

In November, state and community leaders celebrated the ribbon cutting of the new IBM Client Center: Analytics Solutions Lab. Gov. John Kasich and Ohio State University President E. Gordon Gee were on hand. U.S. Sen. Sherrod Brown and Columbus Mayor Michael Coleman sent video messages. Big data, it turns out, is a big deal.

The $3.2 million analytics center is a cutting-edge facility in the field of so-called big data, the next big thing in intelligence technology. The result of two years’ planning and discussion among such local companies as Nationwide, Huntington Bancshares, Limited Brands and Cardinal Health, the center heralds a robust future in IT for Central Ohio. Mike Keller of Nationwide proclaimed at the ceremony, “This is the most impactful collaboration between the government, local businesses and the academic world that I’ve ever seen.”

IBM intends to staff the center—off Tuttle Crossing Boulevard near Dublin—with 500 new hires in addition to 671 existing employees, for a total annual payroll of about $116 million. The facility is the newest part of the company’s worldwide network of 18 analytics solutions centers employing more than 9,000 business analytics consultants. IBM has earmarked more than $100 million for big data research.

The need for analytics comes out of the astonishing fact that 90 percent of the data in the world has been created in the last two years, according to an IBM information bulletin. The sources for this overwhelming flood include Web pages, social network messages, recorded telephone conversations, cellphone location data, patent filings and medical images. The data pool will continue to enlarge exponentially each year to come. Analytics is the tool used to make sense of all this information, using massive computers and incredibly sophisticated applications. Experts speak of the four V’s of analytics:

Volume: The ability to store huge amounts of data.

Velocity: The ability to analyze data in motion and determine what’s going on in real time.

Variety: The ability to convert both structured and unstructured data into useful information.

Veracity: The ability to establish trust in the processes and results of big data.

Analytics’ benefits to all sectors of business—manufacturing, retailing, government, health care, education, science, you name it—are three-fold: a more comprehensive understanding of products and services, an ability to improve products and services and generate new ones, and a capacity for products and services to modify themselves.

Big data activity was valued at $100 billion in 2010 and growing at almost 10 percent a year, about twice as fast as the software business as a whole, according to the Economist. In a 2011 report, the McKinsey Global Institute proclaimed, “We are on the cusp of a tremendous wave of innovation, productivity, and growth, as well as new modes of competition and value capture—all driven by big data as consumers, companies, and economic sectors exploit its potential.” The worldwide market is expected to reach $34 billion by 2014.

Alex Fischer, president and CEO of the Columbus Partnership, says the idea of a big data center was broached by executives from Cardinal Health and Nationwide. Soon, Limited Brands, Huntington and Battelle joined the conversation. The need for such a center was obvious. The ability to quickly navigate huge data sets gives any company an advantage over its competitors. The success of companies using big data applications such as Google, Amazon, Yahoo, Facebook and eBay signals the need for businesses everywhere to employ analytics.

Choosing the right company to invest in a Central Ohio data center was a no-brainer. “Columbus 2020 approached us about the proposal,” says Rollin “Ron” Lovell, vice president of the IBM analytics center. “It made sense from a geographical perspective. The talent pool here is comparable to the East and West Coasts.”

IBM is receiving a number of tax breaks and incentives for the analytics center: an eight-year, 60 percent job creation tax credit from the state; a six-year, 65 percent credit on Columbus income taxes for new employees; and an annual cash payment worth 25 percent of the new employees’ income tax. But Lovell is adamant that the financial perks didn’t influence the decision to locate here. “The tax incentives were not even a factor,” he says. “They’re icing on the cake.”

Central Ohio’s IT Roots

Several local organizations have been pioneers in the big data field. CompuServe Inc. started out in 1969 selling computer time-sharing to companies that couldn’t afford their own mainframes. Founded by Harry Gard and his son-in-law, Jeffrey Wilkins, the company later entered the consumer market before being split up and sold for $1.3 billion to AOL and WorldCom in 1998.

At nonprofit research and development giant Battelle, Brian Graham, vice president of data analytics, says the organization has analyzed massive volumes of disparate data sets to address problems of national security and to provide predictable analytics in health care, resulting in improved patient treatments and outcomes and reduced costs. Its Oak Ridge, Tenn., facility recently began operating Titan, the world’s fastest supercomputer.

OCLC, a library service and research organization established in 1967 in Dublin, runs WorldCat, the world’s largest online catalog with a database of nearly 2 billion items. Mike Teets, vice president of innovation at OCLC, notes that the database includes “anything you can find in a library,” including electronic texts. New entries are added at a rate of one every 1.2 seconds.

Chemical Abstracts Service (CAS) has served scientists and researchers for more than 100 years with data that enables them to “analyze information from massive resources into targeted, manageable results to speed their research,” says web marketing manager Rhonda Ross. The CAS Data Center, the digital hub for the world’s largest electronic chemistry database, has been growing exponentially. Adding the first 10 million unique molecules to the CAS Registry took 30 years, but the most recent 10 million were added in only a year and a half.

Other businesses developing big data expertise dot the Central Ohio landscape. Information Control Corp. (ICC) bills itself as the largest privately held IT services provider in Ohio. Established in the early 1990s, it now assigns 150 of its 550 consultants to business intelligence, analytics and data integration. Last year, ICC reached $60 million in revenue.

ICC may be bucking the trend. “The trend [of analytics] has been toward much smaller companies,” Teets says, because of open sourcing and the diminished cost of both computer hardware and software. An investment of $20,000 is enough to get started. “It’s not like you need a warehouse,” he says. “You can actually put the environment for analytics on a thumb drive.”

Indeed, Columbus has dozens of small startups specializing in big data. One is Farsite, a seven-person company that builds statistical models for retail and medical clients. To prove the validity of its analytics capacity, Farsite correctly predicted five of the six top Oscar winners, missing only best director. (They chose Steven Spielberg instead of Ang Lee.) “We beat out all of the data-driven resources, including Nate Silver’s FiveThirtyEight,” boasts Farsite co-founder Michael Gold.

Cultivating a Workforce

Finding and recruiting big data workers is a difficult assignment, and the competition for qualified people is intense. According to the McKinsey Global Institute, the United States faces a shortage of 140,000 to 190,000 people with deep analytical skills as well as 1.5 million managers and analysts. Graham says Battelle is working with Columbus State Community College and Miami University to develop educational programs to prepare students for big data jobs. The push is “still in its formative stages,” he says.

Christine Poon, dean of OSU’s Fisher College of Business, says data analytics workers “must not be afraid of math and have good quantitative skills, terrific critical thinking and deep subject matter expertise.”

To prepare Fisher students for that challenge, the college will implement an “industry cluster” for data analytics starting in fall semester. Poon anticipates 30 to 50 juniors will undertake the one-year program, studying business problems in such fields as health care, energy and consumer package goods.

Participants will intern with IBM or a similar company (two agreements are still being finalized). Poon says students can continue the program in their senior year and will be ready to enter the field of analytics upon graduation.

A specialized MBA in data analytics will be offered at Fisher by 2014, Poon says. Elsewhere at OSU, targeted coursework and majors in data analytics are being formulated in engineering, health sciences and physical sciences.

The Partnership’s Fischer finds this strategy encouraging to the region’s future growth. “Communities that can rapidly move talent pipelines to match business needs,” he says, “will get there first. Growing higher-paying jobs will make Columbus a permanent hometown for many OSU students.”

ICC has had significant success in recruiting and training college graduates. CEO Steven Glaser says the company hires recent grads from about 15 colleges and subjects them to three months of rigorous training. Within six months, Glaser says, the new hires “are doing tremendous things. The system has allowed us to compete very well with other companies in the U.S.” ICC plans to add another 100 people to its workforce this year.

“ICC is a resource for us,” says Lovell, citing its staff training as a model for IBM’s own.

Future Growth

Will the IBM analytics center propel Columbus to become the next IT locus, rivaling San Francisco and Boston? Likely not, but it could provide solid growth for a long time to come.

“IBM’s investment is a fantastic win for the local community. But it’s just one piece—albeit a significant piece,” says Battelle’s Graham.

Jennifer Bewley of Dice, a New York-based company that surveys IT employment nationally, says local salaries are rising as demand for workers increases. “Columbus is rapidly working its way to the national average [salary] and the last two years’ rate of increase has been stronger,” she says.

For 2012-13, the national average IT salary is $85,619; in Columbus, it’s $82,831. Bewley says big data professionals, on the other hand, have an average annual salary of $113,739. Further narrowing the gap improves the chance to lure workers to Central Ohio. Dice lists Columbus 19th among the 20 top cities for IT, immediately behind Pittsburgh and well behind Cleveland.

“Columbus is kind of a sleeper community regarding intelligence technology,” says Teets. Citing CompuServe, Battelle, CAS and his own OCLC, he notes, “We were really early to the network party.”

Fischer says sitting around the table with business, government and education leaders is a good model for starting and expanding other IT developments. “Columbus is big enough to have scale but small enough that CIOs can sit around the table. At the end of the day, business still gets done by individuals,” he says.

While no one expects a sudden boom in IT or big data, those surveying the field do anticipate that it will get incrementally better. Kenny McDonald, chief economic officer of Columbus 2020, says simply, “We’re one of the players now. We want just a little more than our fair share.”

Dennis Read is a freelance writer.