Job Outlook: Data Analysis Services Sailing Offshore

Data analytics lies at the heart of many businesses. A retail bank needs to understand its customers? spending and borrowing habits in order to determine their propensity for taking out loans. A consumer-goods firm needs to perform market research to determine whether a new brand of detergent or cough syrup is likely to take off or end up sitting on grocers? shelves. An investment firm needs to analyze a company?s financial data in order to issue buy/sell recommendations to its clients. Before the data can be analyzed, however, it must undergo preparation. Normalization, standardization and cleansing of data are the most time-consuming and expensive processes in data analysis, and must be performed perfectly. If not, the data that?s used for analysis, and the conclusions drawn thereon will be flawed. Solving the complicated statistical and number-crunching problems are the province of specialized firms ? service bureaus ? which perform the dirty work of analysis, and deliver to their clients pure, clean data, which they can depend upon for accurate forecasting. Many of them have been around for years, toiling away quietly in the background while churning out reams of data and reports, utilizing statistical-analysis packages such as SPSS and others to deliver their results. But with the unshackling of geographical barriers brought about by technological advances, some of these tasks can and are being farmed out to a new breed of service providers ? more often than not located offshore, where low costs and cheap labor are in abundance. Offshore Concentration In many ways, data analytics epitomizes Knowledge Process Outsourcing (KPO) ? which adds to Business Process Outsourcing (BPO) skills garnered through exposure to a particular industry, such as mortgage processing in banking, financial analysis in investment banking and statistics in market research. As has become apparent in recent years, if work can be outsourced or sent offshore, it will be. The economics are too compelling to resist, and the same economics that have driven work in business processes, software and product development and technology and infrastructure management offshore are also at work in KPO, and nowhere more so than in analytics. These new offshore service providers tend to be concentrated in India. The service providers specialize in analytics, and have spawned a range of subspecialties around research and development, data mining, engineering design work and more. The explosion in offshoring that?s fueling the gold rush in the Indian cities of Bangalore, Chennai and Mumbai has fueled a miniexplosion in data analytics. The numbers are as staggering as they would have been unbelievable five years ago, when BPO and offshore development work was still largely unknown to the general public. ?The worldwide market for data analytics is today $2 billion, and is expected to climb to $17 billion by 2010, of which $12 billion will go to India,? says Ashish Gupta, Country Head and COO, Evalueserve, a service provider. By 2010, the breakdown of the knowledge-processing sector will be as follows: Data search, integration and management (29%), biotech and pharmaceuticals (18%), engineering and design (12%), R&D (12%), remote education and publishing (12%), animation and simulation services (8%) and others (9%). As can be seen, several of these segments are heavily based on analytics (See Chart 1).

Examples of analytics services include analyzing the impact of TV advertising on customer acquisition or identifying and removing duplicate entries in a prospect database to increase accuracy. The latter involves the use of algorithms to split American and foreign names into their phonetic components and find matching names in a database. Eliminating duplicate names enables more efficiency in up selling and cross-selling campaigns, customer-complaint resolution and obtaining a 360-degree view of a customer. Data-analytics firms face some stiff competition from captive operations, which have moved many of their analytics offshore. General Electric has 1,000 employees working on analytics in India, American Express has 350 and HSBC has 200 working in India. Some onshore companies, such as Capital One Financial have ingrained analytics into every one of their business processes, so the company is always clued in to what products are selling and to whom, and which products are profitable, so that it can adjust its marketing strategy accordingly. Large financial institutions have thousands of employees working on analytics. As their numbers grow, the case for outsourcing and offshoring becomes stronger because of the labor arbitrage and the abundance of talent. ?A typical project will entail about a dozen people, most of them highly skilled, who will be dedicated to the project for six months or more,? says Lalit Wangikar, VP, Inductis, India operations. Under those circumstances, offshoring will be an attractive alternative to fielding an internal project team. Working Directly with End Users In one of the models of KPO delivery, the service provider works directly with the end user ? a financial institution, media company or a manufacturer ? and functions as a professional-services firm, performing onsite data gathering, interviews, problem definition and solution. Inductis, an Indian service provider that specializes in analytics, employs this model, which it calls staff augmentation because it involves embedding consultants within the client?s organization to solve problems such as customer-life-cycle management, product development, business re-engineering and financial management. A typical consulting team will include an analytics lead, with 3-5 years experience leading data-intensive analytics projects; a modeler, with 2-3 years experience in developing statistical-analysis methods; and a programmer analyst, with two years experience in data loading, quality checking, ad-hoc analysis and report generation. The work that this team will perform includes hosting, managing and creating an integrated view of the client?s customer data; generating samples based on ad-hoc or streamlined survey requirements and performing complex data analysis; and model validation and scoring.

Inductis deploys its in-house methodology, MicroAnalytix, to discern the meaning of endless streams of data and to optimize customer targeting and acquisition, identifying cross-selling opportunities and managing risk. Typical engagements include strategic planning (e.g., assessing both internal and external causes of slowing growth at a credit-card issuer); risk management (e.g., designing fraud detection and prevention systems for a commercial lender); attrition prevention (e.g., segmenting an insured customer base for a health insurer); and offshore optimization (e.g., optimizing the ratio of offshore and onshore technology-development consultants). Inductis also has a separate analytics service that provides lead management and prospect data maintenance, support for ongoing analytics tasks such as customer-acquisition campaigns, ?swing? capacity for risk and marketing-analytics teams, and collections file processing. Working Through Market-research Firms Another model for delivering analytics services is to work with market-research firms that work directly with clients. In this model, the market-research firm becomes the client of the offshore service provider, offloading some of the more data-intensive functions to the service provider. These service providers don?t design the research itself; their job is to provide support services to the market-research firm. ?We?re doing what the operations department of a market research firm used to do,? says Rahul Sahgal, President and CEO, Annik Technology Services. ?Even the largest operations, such as that of U.S.-based NPD Research ? an Annik customer ? are being outsourced,? he says. Annik focuses on providing research and data-related services. These include data normalization and cleansing, conducting market research and customer-satisfaction studies, formatting unstructured data into structured data, and data delivery, including charting and report-generation software. The company, which has 20 customers in the U.S.A. and Europe, is skilled in the use of SPSS and other statistical methodologies. The firm develops reporting systems that can create presentation-ready reports, including tables, graphs, and narrative analysis. The value added is the boost in productivity and reduction in human error for the preparation of complex reports comprising large number of pages with information derived from multiple data sources.

As with other forms of KPO, the potential for market-research analytics is huge. The market-research industry totals $22 billion globally, of which 40% can be outsourced, says Sahgal. ?About $40 million in processing work is being performed in India by third-party service providers, and captive offshore operations account for another $60-$70 million,? he says. The Indian market is dominated by a few players, such as WNS? Knowledge Services division, Evalueserve and Annik. Since many of the techniques used in market research can be applied to other analytic-intensive tasks, the possibility exists for expansion from market research into other services employing deep analytics, such as Intellectual Property (IP) research. In IP research, the business case for offshoring is the cost of filing a patent. A typical application filed with the U.S. patent office costs between $10,000 and $15,000. Offshoring even a small portion of the patent process can save up to 50% of this cost. An IP specialist in an offshore location can produce a preliminary draft of a patent application, which is then reviewed and modified by an onshore patent attorney before it is filed with the patent office. Other forms of IP-related services that can be offshored include asset management, researching technology domains, licensing and commercialization. Such services can be provided not only for patents but for other forms of IP, including trademarks and copyrights. Some patent-law firms in the U.S.A. are hopping on the offshore bandwagon themselves, setting up captive back-office centers in India to perform this work. As long as the cost differentials and other value propositions for offshoring remain strong, it?s a safe bet that KPO and analytics will help drive the growth of offshore centers, resulting in a win-win situation for clients and service providers.