Outsourcing Analytics is the Next Step Forward

March 31, 2016 11:16 am | Updated 7 months ago.

By Arup Gupta

Ability to analyze big data, in the coming years, will hold the key to success of business organizations.   Data analytics is concerned with digging deep inside data sets to unravel market trends, customer’s likes and dislikes and important business information. Analytical findings can give companies an advantage over their competitors. These findings can further help business organizations to take better decisions, formulate new marketing strategies, opportunities to generate more revenue, to enhance productivity, improve customer service and also develop unexampled business ideas.

Should organizations outsource?

Big data analysis is usually done by data scientists, who use statistical software and predictive analysis to delve into unstructured data to provide meaningful responses. Organizations today are facing the dilemma of whether to develop an in-house data analytics team or outsource their analytical work. According to an article published in MIT Sloan Management Review, confidence in analytics has helped large organizations like FedEx and Wal-Mart to sustain their position as market leaders for decades. Both these companies have a team of analytics professionals who have helped them to consistently reduce cost and increase revenue.

Internet of Things, increased use of smart devices and development of smart cities is generating a huge amount of data and is bolstering the need for an analytic workforce. A report titled “World Data Analytics Outsourcing-Market Opportunities and Forecasts, 2014-2020”, published by Allied Market Research predicts that  the data analytics outsourcing market will register a compounded annual growth of 29.1% and will touch $5.9 billion by 2020. This growth will be further augmented by small and medium- sized organizations who will find it extremely expensive to amalgamate a team of analysts.

The reason which has led to organizations gradually outsourcing analytics are-

  1. Gap in demand and supply- Acute shortage of data scientists have led to a gap in demand and supply of skilled workforce. A skilled data scientist should have an expertise in mathematics, computer science, statistics, and management. He should be able to visualize and provide adequate solutions.
  2. Specialized Processes – Data analysis consists of a whole range of specialized It involves managing data with the help of data integration tools followed by data validation and cleaning. The next step is developing a model and testing it. The last step is to report insights and develop business rules.
  3. Expensive – An in-house data analyst team is uneconomical and time-consuming. On the other hand, outsourcing is cost-effective and less time consuming.

However, security is a major concern as far as employing the third party to analyze data is concerned. Organizations should be extremely careful before outsourcing their data analytics job. Protection of customer information should always be a priority when sharing information with consultants. Moreover, after the analysis is done, strategic decisions have to be taken in-house.

Growth of the BPO sector

The late 1990s saw the telecommunication industry registering a boom. This led to many large organizations shifting their call centers to Asia, firstly as it was cost effective and secondly because of a huge population that could converse in English. Gradually, other sectors like computer programming, financial accounting, legal research and health care jumped on the outsourcing bandwagon. The 21st Century marked the entry of analytics in the BPO (Business Process Outsourcing) process. India became the hub of the emerging analytic market. A.T .Kearney in its 2016 Global Services Location Index mentioned that India is the leader as far as IT outsourcing is concerned. Following India is China, Mexico and the Philippines have evolved as leading outsourcing markets.

Creating a profitable partnership

The offshore analytics BPO in India started either as a wholly owned subsidiary of the parent company or as third – party vendor. Dell Global Analytics in Bangalore is a wholly owned subsidiary of Dell Inc in America. Research reports have mentioned that factors like the distance between the main office and its offshore plant, proper communication facility, language knowledge, and technical skill are some of the key factors for a successful BPO partnership.

According to an article published in MIT Sloan Management Review, mentioned that company that is situated in markets where it is difficult to get skilled workers generally opted for an analytics BPO to provide the necessary solutions to give them an added advantage over their competitors. The article also highlights an issue that analytics BPO uses this partnership to showcase their talent and market successful applications developed by them in a much larger market. On the other hand, companies who have their own in- house data analytics team also enter into a partnership with offshore BPOs to help them with some generic analytics. This helps them to stay focused on advanced analytics.

Creating a proper balance is the key to success. Analytically challenged organizations can leverage competitive advantage by entering into a partnership with the right kind of offshore analytics BPO. The situation is somewhat different for superior organizations who work with an offshore analytics firm to receive basic analytics at low prices along with some tax benefits. Intellectual property ownership is an important consideration for both clients and a partnership can only be fruitful if both the parties seek to benefit from it.