21 Jan 09 Offshoring set to be an integral part of market research value chain_MRO Buyer

Offshoring set to be an integral part of the market research value chain
The recent buyer survey of market research agencies from various international markets released by ValueNotes found that close to two-thirds of the research agencies surveyed are already offshoring to service providers in India, Eastern Europe and Latin America. While the large multinational research agencies have always been outsourcing certain services, the smaller ones with revenues typically less than $10 m are adopting offshoring. The survey reveals that with greater competition, research agencies, especially the smaller ones, are increasingly using offshoring to gain a competitive advantage.

Most of the research agencies surveyed offshore data collection, data processing and panel services. This is due to the high levels of offshorability of these services. However, many companies have also explored offshoring in relatively “difficult to offshore” areas like project management, report writing and research design.

Data collection offshored by half of the research agencies surveyed

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Source: ValueNotes Research: Market Research Outsourcing – Buyer Survey

Note: Other services include moderation, small pilots for various studies

A large chunk of data collection and processing that has been migrated to offshore locations has been transaction-based. The market research industry which is fairly new to offshore outsourcing is yet to evolve from the ‘traditionally outsourced services’ like data collection and processing, to high-end analytics.

While cost arbitrage is the primary driver for offshoring, research agencies stated that other factors like faster turnaround time and better quality of work are equally important.

Offshoring drivers
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Source: ValueNotes Research: Market Research Outsourcing – Buyer Survey

Quality of work and client confidentiality issues emerged as key concerns. According to a survey respondent, heading a large research agency in Europe “A reduction in cost arbitrage is acceptable but any deviation in quality is non negotiable. In fact, lower quality output has been a severe constraint to increase offshoring volume.”

Offshoring Concerns

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Source: ValueNotes Research: Market Research Outsourcing – Buyer Survey

While better quality and cost are key drivers for most of the research agencies, equally, concerns about quality of work, data security and cultural differences have emerged as key concerns.

Smaller research agencies have an opportunistic outlook towards offshoring and are keen to leverage on all possible drivers. While offshoring is driven by dynamic and current need, quality and client confidentiality are key concerns.

Costs and faster turnaround time are key offshoring drivers for mid-sized research agencies. Offshoring needs are driven by the need to grow, and quality is relatively less of a concern for smaller agencies. Large research agencies offshore for cost arbitrage and enhancing the focus on core competencies. Quality and client confidentiality remain key concerns.

While the offshoring drivers and concerns remain similar across key markets like the US and Europe, these markets differ significantly in the choice of offshoring destinations.

Corroborating the earlier research by ValueNotes, the survey reveals that, currently, offshoring is largely limited to activities lower down the value chain like data collection, data processing and panel services. While there is greater adoption of offshoring by market research agencies, overall penetration is very low with a majority of the agencies offshoring less than 10% of their total work.

According to the ValueNotes’ report on “Market Research Outsourcing: The India Growth Story“, the MRO revenues is estimated to grow from $148 m for FY07 to $800 m by FY12, at a CAGR of 47%. With over half of the survey respondents planning to increase their offshoring volumes (for five of the ten services) in the near future, the MRO industry is set to maintain high growth rates.

Future outlook for MRO – Glass half full or half empty?

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Source: ValueNotes Research: Market Research Outsourcing – Buyer Survey

Over half of the respondents have indicated a significant or marginal increase in the overall offshoring volume in the near future. Very few respondents plan to cut back on offshoring volume, which indicates greater confidence in offshoring and offshore service providers. However, a significant number of respondents have indicated no change in offshoring volumes, indicating that not all buyers are universally satisfied. While some of this may be due to a poor choice of service providers, overall this is a concern for the MRO industry in India.

>Click here to download entire report

ValueNotes Research
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