Analytics to see rise in M&A activities

The M&A activity in the area will see companies acquiring small and niche players in the US and Europe to improve their front-end capabilities and consolidation in the domestic market, largely dominated by over 110 small-size companies in the revenue bracket of $2-$10 million.

The domestic market research outsourcing (MRO) and analytics industry, pegged at $300 million, is growing at a rate of 50 per cent on a year-on-year basis. Larger BPO firms including WNS, Genpact, TCS BPO, Wipro and Infosys BPO offers market research and analytics service to global corporations as a part of their KPO offerings.

Besides, pure play market research and analytics service firms including CrossTab, Ugam Solutions, Annik Systems and Dexterity are also growing at a good pace with the rise in demand for their services both from the US as well as Europe.

The trumpet of consolidation in the domestic market was already blown in 2006 when WNS acquired Bangalore-based Marketics for about $65 million, a deal that raised many eyebrows due to the fact that the valuation of the company was almost 16 times its revenue which was about $4 million at that time, with a headcount of 200 people.

Though many industry veterans complain that KPO firms are being overvalued, most of them are also keen on acquiring such companies. Offshore BPO services provider EXL Service which has acquired Inductis, a research and analytics company in 2006, is looking at couple of more acquisitions in this space to add to the capabilities.

Wipro BPO, which also provides data analysis and market search services, has already made its intention clear at the recent Nasscom BPO summit. Ashutosh Vaidya, Head, Wipro BPO, had said the company was considering suitable candidates for acquisitions.

Ugam Solutions, a pure-play MRO service provider, is actively looking for prospective candidates in the US for acquisition. Jointly owned by Avalon Consulting and KVS Group, Ugam Solutions is presently ninth out of the top 25 market research companies across the world.

The company which is estimated to be in the revenue range of $35-40 million, has already appointed a local investment bankers Avendus Advisors to help it in the acquisition process. The acquisition is expected to happen in the next 1-2 months.

"The analytics market in the US is highly fragmented. The company we are looking at in the US, is in the revenue range of $5-15 million and will bring us news skills like statistical modelling, advanced analytics and data mining. This will also help us in improving our front-end in the US as a hook into the new clients," said Sunil P Mirani, CEO of Ugam Solutions.

According to a recent study by ValueNotes, the competition in the offshore MRO space will be tougher in future with the entry of BPO players in the space. "MRO industry might witness some mergers and acquisitions post 2009.

While pure play vendors will continue to lead the MRO space, competition will intensify with the entry of large BPOs. End to end offerings will be the key to survival for pure-play MRO vendors," Neeraja Kandala, ValueNotes analysts was quoted as saying in the report.

The global survey research market is about $10 billion at present, of which 40 per cent of the works which are more operational in nature are outsourcable. The operational market research works include designing of survey questions, conduct the survey, write the report after analysing the survey, and its interpretation.

Analytics play a major role while conducting a behavioural data analysis which play a key role in containing customer churn.

ValueNotes estimates that India's revenues from off-shored MRO services stood at about $150 million in FY 2007 and expected to reach $800 million by FY 2012. The industry is expected to employ about 33,000 people by 2011-12 from the current level of about 9,000.

Apart from India, countries like Romania, Philippines, Costa Rica and China also provide market research and analytics outsourcing services