Every company needs to understand the market they cater to, to help them identify the areas for improvement as well as areas for opportunity. The research industry as a whole has gone through a lot of standardization and consolidation due to the advancement of technology. The market research industry, in particular, has changed over the years due to globalization, increasing competition, changing market demand, among other factors. All these changes paved the way for greater outsourcing.
Market research outsourcing is relatively new compared to other outsourcing segments. It has all the potential elements to grow into unprecedented levels, as current market conditions forced research cycles to be shortened in order to be more cost efficient.
In conducting market research, organizations could either undertake the project themselves or choose a market research service provider. ValueNotes, a leading provider of research, intelligence and information services, released the results of their report titled “Market Research Outsourcing –Buyer Survey”. According to the report, “Market research service providers have been gaining prominence in the market research value chain. The offshorable industry for market research is estimated at $4 billion in 2006… The recent buyer survey of market research agencies from various international markets finds close to two-thirds of the research agencies are already offshoring to companies in India, Eastern Europe and Latin America. While the large multi-national research agencies have always been outsourcing, the smaller firms with revenues typically less than USD 10m are fast adopting offshoring. The survey reveals that with greater competition, research agencies, especially the smaller ones are increasingly using offshoring to gain competitive advantage.”
The interesting part of ValueNotes findings is the reason for the increase in MRO, which is attributed to faster turnaround time and better quality of work. Some people would probably argue that doing the research internally is more efficient, but the risk there is one would get no more than what they paid for. This restriction does not apply to market research service providers, as they are likely to produce more in a shorter period of time without sacrificing quality to satisfy Service Level Agreements (NYSE:SLA). And going beyond their clients expectations would result to contract renewals. Hence, a win-win situation for both clients and market research service providers.
In 2007, the global market research industry is valued at $24.6 billion. Europe managed to capture 43% market share, North America with 36%, and Asia Pacific with 14%. ValueNotes principal analyst Pranav Dixit believes: “While shortening research cycles and greater cost pressures are compelling drivers for offshoring, the propagation of technology in research functions is facilitating offshoring. Additionally, the changing role of research agencies where they provide greater “insight and foresight” to their clients has increased the inclination of these companies to offshore larger portions of the research “execution” to service providers across the globe.”
Data collection, processing and panel services are the top outsourced activities due their high offshorability. While project management, report writing and research design were determined to be the most difficult areas to offshore.
Source: Pulse Group blog
Research agencies are expected to boost outsourcing of non-core activities in the next 3 to 5 years, as shown in the data above. Pranav Dixit estimates the potential for offshoring research services to be in the range of $8 billion to $10 billion in 2010. “This growth will be primarily driven by ‘rapidly growing’ and other ‘untapped’ opportunities”, adds Dixit.
Disclosure: No positions.
Author: Kim G.