The week after he left, there was much debate in our team about what the protocol in the blogging world was… Do we remove his blog posts? Do we hide the pages until our next blogger takes it over? By popular demand, we decided to leave his posts as they were. It would be a shame to not be able to share his interesting posts with the rest of the R&A industry!

We do hope you’ve enjoyed reading Suheil’s blog posts. We will be in touch with you as soon as we have an update…

Thanks very much for visiting our blog. If you have any questions/ideas, please do get in touch at reetika@valuenotes.com / 20 6623 1717.

Regards,

The Editor, SourcingNotes Blog

So how far have we reached? As per the “New Gen Market Research” Group MR trends survey, the top 3 answers for “new analytical techniques” that companies want to use were,

• Blog mining
• Social Network Analysis
• Screen/Web Scraping

Research companies and buyers (corporates) around the globe are looking towards the web, more so towards social media to dig and search for fruitful spurts of information and data. Effective as it may sound, there are still industry leaders around the world who do not feel the immediate need to invest in social media activities. As per a survey conducted by Econsultancy, one third of the businesses are still reluctant to infuse their company to social media activities. As per the research their concern is not associated with cost but with what will they get in return and when. If we look in terms of cost, social media activities would be quite cheaper as compared to traditional advertising and direct mail techniques. However companies should realize that the primary benefit of tapping into social media is about brand building and establishing relationship with your consumers and prospective masses with an indirect impact on the revenues benefits.

Tracking consumers though social media will impact the company’s bottom line in the long run, however its all about understanding the immediate need and requirement of your target audience. So in times of recession, how does a company decide what to go for? A short term solution that will help them save costs or a long term investment to build brand and gain customer loyalty which will eventually lead to recurring revenues.

The top 25 market research agencies around the world contribute nearly 65% of the global market research revenues and have their presence across all continents. Indeed, that has led MRO companies to target the big guns to establish strong relationships with them. A strong relationship with an established market research agency offers an opportunity to build on the services capabilities of an MRO vendor, build credibility in the buyer market and of course, have a steady cash flow. However MRO vendors are also looking at the small and medium sized research agencies for business.

Although the top 25 global giants offer huge business opportunity, it has always proved a difficult segment to crack.

• Global MR agencies continue to have large internal research teams
• Majority have captive centers spread across the globe

This also limits the offshoring of services for a MRO vendor.

Looking at small and medium sized research agencies means a different approach for a MRO vendor as opposed to a large research agency. If the value proposition for a large research agency is making operations better and leaner, the value proposition for a small and medium sized research agency is about being the operation itself. A small and medium sized research agency generally requires an onshore presence with a team of 7-10 helping the company function and operate at its optimum.

In times of recession when the small and the medium sized research agencies have been severely impacted reduced cash flows, it has become all the more imperative for them to offshore. Although offshoring is not the ultimate solution, it is an effective one in the short run in order to sustain. However it would be interesting to see whether MRO vendors can leverage relationships on a continuous basis, much like large research agencies.

Given the current recessionary crisis, although the MR industry’s overall growth has been slightly sluggish, it has shown better revenue figures when compared to other sectors. Global MR companies have resorted to budget cuts as one of the precautionary measures to deal with cost pressures caused by the recession. Budgets were slashed by 9.5% in 2008, and by 2.9% for the first half of 2009.

Market research industry: keeping a watchful eye
The market share of the top 10 research companies has been 55-60% for the past 3-4 years with established players diversifying and expanding their markets globally. Large global companies like The Nielsen Group, TNS, Kantar Group, Synovate, etc, have penetrated global markets and have established long-term relationships with FMCG companies and other industry leaders. The opportunity for mergers and acquisitions is very high in the global MR industry given the large number of unorganized and small players. Niche players, with regional expertise in markets like Latin America, Africa and Asia, are attractive acquisition targets for captives of large global MR firms.

Research companies have seen layoffs and a reduction in travel and salary increments with a view to reduce cost pressures. Companies have now evolved to using more innovative methodologies and techniques to be able to offer more to their clients in order to remain competitive.

Market research outsourcing industry: cautious recovery
Market research offshoring (MRO) vendors have played a pivotal role in the growth of the industry and are now moving from a vendor role to one that is more consultative and partnership oriented. Revenues from the nine year old Indian MRO industry are about US$200 million – $220 million for the year 2008. The industry has about 130-140 service providers, and consists of third-party vendors and captive delivery centers of multinational research and media agencies.

The delivery portfolio of the Indian MRO vendor has evolved over a period of time as service providers have moved from standardized task-based services to a full service end-to-end format with a range of inter-related service offerings. Few Indian service providers have grown in terms of scale and service offerings and are now competing with global MR agencies and onshore service providers for business. Established service providers like Integreon, Ugam Research Solutions and Annik have gained a strong foothold in the buyer markets in the US, Europe and Asia. These companies have created strong brand awareness through strategic expansion and adding multiple service capabilities. Recently Ayala backed Integreon, a globally reputed knowledge services provider, acquired Grail Research, a unit of US-based management consulting company Monitor Group. Ugam Research Solutions, offering services in 45 languages across 60 countries, crossed the 1,000 employee mark in September this year.

Paradigm shifts
The growth in the Indian MRO industry has been flat since the debacle of Lehman Brothers in September last year.

• MRO vendors have been prudently building on their service capabilities and expanding their presence in diverse geographies. Last year exëvo opened a new center in Argentina to capitalize on the huge untapped Latin America market. The company received a positive response from the European market when they opened a new center in London.
• MRO companies have moved their focus from offering low value traditionally outsourced services like data collection and data processing, to high-end analytics and data mining services. MRO vendors have either acquired capabilities or have organically built on their current expertise. Integreon’s acquisition of Grail Research will help them expand their expertise in fast growing segments such as research & analytics and business intelligence.

Going forward, MRO vendors would look at offering services higher up the value chain, like analytics, panel services, project management and data mining, in order to compete for clients on a global scale.

• Technology would play a vital role in building capabilities and moving up the value chain for MRO service providers. Automation and role of technology in offshored processes can be viewed at two levels.
• The wide usage of social media has impacted the market research industry with global companies looking to social media to track consumer behavior and feedback. Websites such as Twitter, Facebook and Orkut have been used to track consumer responses about a company’s products and services. While social media represents individual customer opinions, collating and analyzing these opinions provides invaluable insights into their collective mindset.
• Recently Twitter planned to acquire / partner with small start-ups primarily to help firms manage comments and responses to spin off as a successful consumer behavior tool.

The future of the global market research industry and its impact on offshoring would largely depend on innovation in business models and research techniques, and the ability to expand. MRO vendors in India have grown organically and inorganically by acquiring domain expertise and technology. Due to increasing competition and recessionary pressures, market research will have a more focused and proactive approach.

This article was first published in Global Services.

Although this is a small sign of improvement, it does gives us a small peak into what we can expect in the coming 6 months. With the global recession revenue worm slowly ceasing to dip, a slow recovery growth rate will have a positive impact on the business of the research companies. On a more positive note, 36% of the respondents have seen an increase in their turnovers, compared to 20% in May’09. The cross-section would be of more interest, in order to see how big (in terms of scale and maturity) are the agencies who have claimed an increase in the turnovers in the past 6 months. It has been the relatively small-mid size companies that have been negatively impacted by recession. This cross-section becomes important, as we also have 23% of the respondents now that have experienced a substantial decrease in their turnovers, compared to 21% in May’09.

In terms of manpower, there has been a reduction in terms of companies laying off employees and an increase in the number of respondents that have hired in the past 6 months. The increase has been very minimal, keeping in mind the agencies will be careful and definitely would like to test the waters before they think about diving in.

Looking at the future, research agencies are marginally positive about the recession in the long term. Majority of the respondents believe the impact of recession on the market research agencies would last anywhere between 6-24 months, however the % of respondents have gone down from 86% in May’09 to 80% in Nov’09. I do believe we would  see a slow and gradual rise in turnovers for research companies in the next one year. However, a lot will depend on changes in research methodologies and technologies that would come into the picture. With social media and analytical tools already enhancing (not changing) the landscape of research, it would be interesting to see what kind of impact these innovations have on the turnovers of research companies.

However of late we are seeing acquisitions and funding in the Indian offshoring service providers. Global knowledge services provider Integreon recently took over Grail Research. The company is a global strategic research and decision support firm, part of the US-based management consulting company, Monitor Group. With the global market research industry laying low for a while, it does provide Indian knowledge services and large IT/BPO players opportunities to acquire or form strategic partnership with onshore service providers. Indian onshore knowledge services providers have grown in the past 2-3 years in terms of scale and services maturity. Few of the larger players have established relationships with large clientele and are moving towards a more advisory role which has always been played by prominent market research companies like AC Nielsen, Synovate, TNS, Ipsos etc.

Apart from the larger market research companies, the global market research industry is filled with small and niche companies that have build capabilities in specific service lines. With offshore service providers attaining significant size and financial strength, will we see more acquisitions in the knowledge services space??

A recent report by Rock Hopper Research titled ‘Research Industry Trends 2009 Survey’ talks about the various trends witnessed in the market research industry for the current year. Apart from these, the report talks about the impact of recession on offshoring and the impact of social media research against the traditional research techniques. One finding which corroborates what I wrote in my blog was that the clients have become more demanding and want results faster. The other interesting finding from the report was that more and more (63% of the 512 respondent base) corporates are looking to conduct their own surveys with in-house staff and the internet. However, I still question how long corporates can sustain and add quality to research need by using in-house techniques, rather than entrusting it to experienced domain experts.

Another interesting finding from the report was that outsourcing would not see positive growth for the current year. That leaves us thinking, how does that bode for the market research landscape? More and more corporates are now hooked on to social media research techniques and with the help of tools like Google Social Search and companies tracking social media websites, corporates have an opportunity to procure analytical data without investing heavily in market research companies. Worth a punt?? In the short run, maybe yes. Corporates might look at quick solutions to address immediate issues and challenges. They might be successful as well. However continuous research and tracking is what is required in order to fully understand consumer needs. Continuous tracking requires domain specific resources and the right tracking tools that are being offered by research agencies. If the corporates look at continuous tracking it would require additional time and cost to allocate that to an internal resource. Research expertise from professional market research agencies is second to none. The market research industry is definitely here to stay. Like all sectors it would see up and down based on market conditions and demand for services. However, with every sector looking to know its consumers in order to retain them, market research seems to be the only solution! Care to differ?

As rightly pointed out by Gary Boomer, President of Boomer Consulting, mentioned in his article, apart from tracking information and comments on websites, its important for companies to create communities where people with similar preferences and choices can be grouped to get an unbiased opinion about the company’s product/services. This can be similar to forming a panel for panel discussion. Information from social media websites is usually in a crude form, spreading from one medium to the other like wild fire. Creating a community would lead to  a more focused approach to monitoring and tracking information in a format desirable by the company.

These rapid changes in research techniques leave us speculating about what the future really holds for research. From telephonic and face to face consumer surveys to mobile technology to the use of social media websites, research companies are looking at all the avenues to track consumer preferences. As an example, the UID project that would be implemented in the coming year in India would facilitate better and focused tracking of consumer behavior. But that is for the future. A lot will change from now until then. When speculation lends itself to imagination, one can envision gizmo gadgets that track consumer thoughts as they are created, or maybe even before they are formed! Scary! Would anyone like to venture a more realistic guess at the future for research?

As per a report by Morgan Stanley, out of the certain areas in research (viz insights, market research, etc.), insights has been one area whose revenues have been largely hit. Insights require high end analytical tools and a consultative approach which companies around the world would rather avoid at the time being, due to budgetary constraints. On the other hand, research companies around the world have been innovating through their use of methodologies and tools to come up with new online survey methods. The use of social media and online tools has  in a way helped research companies keep their data collection costs in check.

Although we have seen cuts in marketing budgets for companies around the world, data collection and research activities would still not be affected in a way that would cause a sense of havoc. In fact, in the current economic climate, firms  are doubly vigilant about consumer opinions  (for their offerings, competitor’s offerings, etc.). It is thus real time updated data about products/services and consumer behavior that will help companies make quick decisions and react to the dynamic and volatile market. Research companies need to look at plugging in the latest company/industry updates and observations to enable companies to react in real time. It is only then that real time benefits would follow suit for research companies. Ka-ching, indeed!!

Along with countries in the Middle East, the South East Asian tropical country of Malaysia has seen phenomenal growth and popularity in Islamic finance services. Add to that, the growing IT/ITeS industry and Malaysia’s success in becoming one of the preferred outsourcing destinations offers domestic and international IT/ITeS companies a chance to grab on to the first mover’s advantage.

The Malaysian Islamic finance industry is looking at innovations in the product portfolio to attract more customers along with diversifying the existing customer base. Product diversification would come through issuance and trading of project finance, derivatives, private equity, retail banking, real estate products and similar such products. The need to formulate advanced products leads to understanding customer demands and preferences to customize products to suit different investment behavior. IT and ITeS companies with analytical capabilities and deep domain skills in BFSI (especially in Islamic finance) will look to capture a huge share of the relatively unexplored market.

Although the opportunity exists in a market which is very nascent, building domain skills and expertise in the Islamic finance industry would be a uphill task. In order to innovate means to understand the Shari’ah laws more closely. Add to that the expertise in BFSI products in order to explore newer avenues. This creates a need to develop domain expertise in Islamic finance with a background in IT/ITeS. Companies would look to partner with local universities to create that talent pool that can be leveraged in the future. The question still remains is how fast the outsourcing vendors can tap the market or will the Islamic banks look at captive divisions to support their operations?