Offshoring set to be an integral part of market research value chain: MRO Buyer

Wednesday, 21 January 2009

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 are already offshoring to service providers in India, Eastern Europe and Latin America. While the large multi-national research agencies have always been outsourcing certain services, the smaller agencies 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 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

Source: ValueNotes’ report on Market Research Outsourcing – Buyer Survey

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

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 in offshoring volume."

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

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 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 for an increase in offshoring volume (for five of the ten services) in the near future, the MRO industry is set to maintain high growth rates.

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 poor choice of service provider, overall this is a concern for the MRO industry in India.

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