ValueNotes recently published a report "Banking and Financial Services Offshoring: From Transaction processing to Analytics ". In this context, our visit to a recent outsourcing summit was an interesting experience as several of the speakers were head honchos of Research and Analytics firms. The interactions at the summit reinforced our earlier analysis, and threw up some interesting insights.

The 'What' and 'Why' of Research and Analytics?

Research and analytics is an emerging service area that has picked up steam in the last two to three years, especially in the Banking and Financial Services space. The trend has been to outsource the support research and basic modeling functions, with the research having strategic decision-making implications being retained in-house.

Components of Research and Analytics

Source: : ValueNotes' Report on Banking & Financial Services Offshoring

The emergence of research and analytics marks the beginning of offshoring of high-end functions to India. The Spitzer's Ruling, which mandates the investment bankers to source research from independent research firms to supplement their own research, has been an important driver. This is over and above the fact that qualified CAs and MBAs are available abundantly and a lot cheaper in India.

R&A third-party vendor space in India

Most of the large BPOs like WNS, Infosys BPO, ICICI OneSource already handle some amount of research and analytics work. Over the last couple of years, a handful of pure-play Research and Analytics firms focused on the Banking and Financial services space have emerged. Notable among these are Inductis, Copal Partners Integreon and Amba Research. Other players like Netscribes, Smart Analyst, Smart Cube, Fractal, Aranca also provide services to other verticals like Consulting, FMCG, Insurance and Retail.

Dramatic growth envisaged

"Research and Analytics" has emerged as the fastest growth segment in the BFS offshoring space and the momentum continues to accelerate - growing at the rate of 50-60 percent year-on-year. The current market size for research and analytics offshoring to India - captives and third party included, is estimated at around $160 million, which is approximately 8.75% of the offshore BFS market in India. We estimate that Research and Analytics offshoring to India in the BFS space will be close to $800 million by FY2011.

Challenges Ahead

Ravi Challu, VP - Professional Services, one of the speakers at the conference rightly pointed out that the challenges in this industry like recruiting, training and retaining are not hugely different compared to other industries like IT. However, the IT industry took shape over a decade or so, whereas the R&A space is barely two to three years old. The demand is way too much and turnaround expected way too quick, which puts immense pressure to hire skilled people.

The experiences and views shared at the conference reveal that every company is exploring various models to grapple with these challenges. After losing several initial recruits due to the huge mismatch in expectations, Lokendra Tomar, VP - Knowledge Services, Integreon said that they have now started an 18-step recruitment procedure for hiring. Rahul Shah, AVP & Head - Solution Design & Implementation, Knowledge Services, Infosys BPO said that the company has evolved a training process that gets an employee ready to deliver quality output within three months. The company is also planning to explore ways to tap a dormant workforce, that of educated homemakers. Of course all this, after the security requirements of the proposition can be met with. Madhusudan Rajagopalan, Director, Aranca said that they provide a good mix of routine and challenging work to keep the employees motivated. Lalit Wangikar, VP India, Inductis believes that appropriate rewards and recognition are a must to keep the employees from straying.

While India appears to be a treasure trove of cheap, skilled manpower for outsourcers, the reality is that a lot of effort is required to polish the skills in order to deliver as per clients' expectations. The KPO industry at large laments the lack of industry-ready manpower, and does its bit by tying up with colleges/universities for its needs at an individual level. However, at another level, active academia-industry collaboration can translate into a steadier supply of at least 'partially-trained' manpower. Until then, the management needs to build in adequate training costs in its business model.

The data and figures in this article have been extracted from the report "Banking and Financial Services Offshoring: From Transaction processing to Analytics" by ValueNotes.

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