Personally, I think that's a bad idea. From the analyst's perspective, s/he would have limited exposure to the various experiences that are invaluable to gaining expertise. Putting numbers on the page is the easy part of analytics; the tough part is understanding enough about the *business* to anticipate questions, possible oversights, pitfalls, best practices, etc. Separating the analysts from those types of learnings that come from being immersed in the team could hinder the analyst's professional development. After all, you'd rather promote someone to a manager role if s/he has already seen how the different functions interact with each other (e.g. been in a meeting where marketing and sales are duking it out) than if s/he knows how to create marking reports for marketing managers and sales reports for sales managers.
And, from the department's perspective, you don't want to have "report monkeys" where people who aren't on the team are developing reports. The main reason for this is that a lot of things are learned in the *process* of making reports. It's valuable to have to think through the approach and model design, 'cause it helps you realize things you might have otherwise overlooked. If you can just go to your report monkey, you'll still see the results (probably faster), but you won't see the process.
I think it's a good idea to *seat* analysts close to each other (so if an analyst has a technical question, s/he can leverage the knowledge of the other analysts who likely do similar work), but my opinion is that it's better to keep the structure based on cross-functional teams.
