International Business Machines (NYSE:IBM) announced recently that one of its clients, Santam, a leading insurance company in South Africa has saved as much as $2.4 million on fraudulent claims in the first four months of using IBM business analytics software. It claims improved speed, efficiency and improved insights are responsible for this saving. It helps assess fraud risk and has reduced settlement time from three days to within an hour for legitimate claims.  IBM competes with Accenture (NYSE: ACN) and Hewlett-Packard (NYSE:HPQ) in the enterprise software market.
See our full analysis on IBM
The Big Data Analytics Advantage
IBM has acquired a host of companies in the analytics space such as SPSS, Clarity, OpenPages, i2 and Algorithmics among others. It acquired sales data analytics company, Varicent, and enterprise search optimizer, Vivisimo, in April and recently announced plans to acquire Tealeaf Technology, which provides customer experience analytics software. It has about 9,000 dedicated analytics consultants and eight global analytics solution centers. Over a hundred partners have adopted its Big Data platform already.
With these acquisitions, IBM hopes to extend its analytics and Smarter Commerce initiative by providing marketing executives, and e-commerce and customer service professionals with real-time insights into customer behavior.  This will also help expand IBM’s data analytics offering which is already the broadest in the industry driven by the Watson system developed by IBM Research which is a key innovation in this space.
The analytical engine uses a combination of statistical models and business rules to assess claims submitted by users and checks for potential fraud, overall risk factors before channeling them to the appropriate investigation unit. This process of segmenting claims according to risk factors helps the company focus on investigating high-risk claims and catching fraudulent customers while rewarding good customers with faster settlement and better service. These adjustments have led to higher operational efficiency and customer satisfaction. This has also led to identifying a major fraud ring less than 30 days after implementation while saving more than $ 2.5 million in payouts to fraudulent customers, and nearly $ 5 million in total repudiations as well as reduced claims processing time on low-risk claims by nearly 90 percent and cut operating costs by reducing the number of mobile claims investigations. 
This will be a major selling point when it pitches its analytics software to potential clients in the future. Technology Services constitute 22.6 percent of our current Trefis Price Estimate and we expect revenues from Big Data Analytics to grow in the coming quarters.
We currently have a $223 Trefis price estimate for IBM, which is 8% above the current market estimate.Notes: