Research and analytics (R&A) is an emerging service area that has picked up steam over the last two to three years. The current market size for R&A offshoring to India is estimated at over US$400 million and is estimated to cross US$1 billion by CY2010.

The vendors in this space include large BPOs, KPOs and pure play R&A firms. Most of the large BPOs such as WNS, Infosys BPO, and Firstsource already handle some amount of research and analytics work. However, recently there has been a significant increase in the level of interest in the R&A space - several large multi-service BPOs are adding R&A services to their offerings.

Over the last couple of years, several pure-play R&A firms have also emerged. Notable among these are Inductis, marketRx, Copal Partners, Integreon, Netscribes, Smart Analyst, Smart Cube, Fractal Analytics, Aranca and Amba Research.

Large BPOs Gearing Up!

Several large BPOs are looking to grow their R&A business both organically and inorganically. Infosys BPO already has a presence in analytics, ExlService acquired Inductis, a specialist in research and analytics and Genpact has always had a strong analytics practice.

A few days ago, Cognizant announced the acquired marketRx, a niche firm that caters to specific market analysis needs of pharmaceutical and life science companies for US$135 million.

The rich product portfolio of marketRx will help Cognizant to widen its scope of services to life sciences industry and strengthen its analytics unit.

The high level of interest in the R&A segment is evident from the spate of recent M&A deals. The exhibit below lists some significant deals in the space.

Significant events in the space 

The rising M&A activity further reflects the eagerness of larger BPOs to quickly complement/enhance specialist capabilities, and thereby add high value services to their offerings.

Why the Focus on R&A?

There are various factors driving BPOs to include R&A expertise:

Widening their service offerings: Adding newer services provides more opportunities for growth. Large buyers typically have the largest needs in terms of research and analytics services. For instance, the largest banks and financial institutions are amongst the biggest consumers of research and analytics.

End to end services: Many large corporate buyers are looking for suppliers to provide end-to-end services. Thus, most of the BPOs are positioning themselves as end-to-end service providers.

Leveraging existing client relationships: Large BPOs have built strong relationships with corporates especially Fortune 500 companies. Given that vendors have invested significantly in these relationships, it makes sense to provide additional services to the same clients.

Adding more high-end specialized services: Depending on the type and level of expertise required for a service, billing rates in R&A range from US$20 to US$100 per hour. Large BPOs are looking to offer an array of services in a bid to de-risk themselves from low-priced, commodity businesses.

Leverage Analytics/Consulting Services to open new business: Inductis was attractive to EXL because they engaged with similar clients, but provided a front-end consulting service. Many large BPOs believe that analytics capability will provide them the much needed differentiator in terms of ability to analyze and provide a solution - and this could be across verticals.

While large BPOs are traditionally focused on the lower-value, higher-volume jobs, at the same time, they need to add high-end capabilities to complete their portfolio of offerings as well as lure clients. We believe that acquisition activity will only increase, as the R&A industry has many sub-segments and a large variety of small and medium players with different offerings and value propositions.