17 Dec 08 Market Research Outsourcing_The India Growth Story

Globally, market research is a $24.6 b industry (FY07). Europe leads with a 43% market share, followed by North America at 36%. Although the market research industry has been one of the earliest users of outsourcing as a tool to enhance focus on their core activities, offshoring is relatively new to the industry. While shortening research cycles and greater cost pressures are compelling drivers for offshoring, the propagation of technology in research functions is facilitating it. Additionally, the changing role of research agencies where they provide greater “insight and foresight” to their clients has increased the inclination of these companies to offshore larger portions of the research “execution” to vendors in India.
Source: ESOMAR Global Market Research Survey 2006-07

Revenues from offshored market research services provided by Indian vendors grew to $148 m in FY07. Interestingly, in a span of just 7 years, this industry has surpassed the domestic (Indian) market research industry, which is estimated at $145 m for the same year. We believe that the offshore market research industry will grow at 47% CAGR till FY10. We expect India’s revenues from offshoring to reach $800 m by FY12.
Key Trends
Traditionally, research agencies have outsourced data collection to specialized agencies. Research support activities like preliminary analysis and panel services support can also be offshored. With the emergence of the internet, offshoring of other “core“ activities like research design, survey programming, project management, data collection, processing and analysis is gaining traction. For activities higher up the value chain, like project management, report automation and analytics, the potential is yet to be exploited. This will emerge as a huge opportunity over the next two years.

Indian MRO vendors began with servicing fairly “standardized” research needs. The services outsourced were in modular format and delivered through short-term project based engagements. However, over time vendors have started catering to the demand for offshored services in both transactional and tactical level activities performed by research agencies. There is a clear industry trend towards “integrated” services.

Driven by the demand to offer a range of integrated services, outsourcers and MRO vendors are experimenting with innovative partnerships and arrangements. Pure play vendors and large BPOs are entering partnerships to quickly gain specialized expertise in high end activities or access to new markets and clients. Several MRO vendors are building capabilities in higher value services like analytics.

Over the next 2 to 3 years, large BPOs and KPOs will look at acquiring pure play MRO vendors to quickly build end to end capabilities. Some relatively small vendors who have invested in developing niche and proprietary products or services, like panels, are likely to be attractive targets.

With consolidation, higher value contracts encompassing multiple services will gain momentum. Emergence of newer services, bundling of core and support (non-market research) services, the preference to work with a single vendor – all these factors point towards a trend of ‘longer term and higher value contracts’.
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