Data Analytics Outsourcing to India: Executive Summary

21 Nov Data Analytics Outsourcing to India: Executive Summary

By Dr. Alok Aggarwal

This article discusses the future growth of the data analytics outsourcing sector in India as well as various myths and hype related to it.
Since this sector is a subset of the Indian Knowledge Process Outsourcing (KPO) industry, we also discuss the expected growth of the KPO industry.

In 2001, the entire KPO industry in India had only 9,000 professionals who generated approximately USD 260 million in revenue; however, this industry had already grown to approximately 75,000 professionals by 2007.   The Indian KPO sector barely grew during the great recession of 2008-09 but it is likely to have 166,000 professionals by the end of 2014 who will generate annual revenue of approximately USD 6.21 billion.  So, overall, during 2001-2014, this sector has grown approximately 24 times, i.e., at a compound annual growth rate (CAGR) of 27% – 28%. Finally, during the past 13 years, India has generated approximately 70% of the revenue of the global KPO industry and our models show that India’s preeminence in this field will continue until 2020, and perhaps beyond.

Going forward, our estimates show that overall the KPO outsourcing industry in India is expected to grow from 166,000 professionals and USD 6.21 billion in revenue in 2014 to approximately 310,000 professionals and USD 12.12 billion in 2020, which would imply 12% CAGR approximately for the next six years. Although most sub-sectors are expected to grow around 12% CAGR, the sector related to data management, data mining, and analytics is expected to grow from 33,000 professionals and USD 1.23 billion in revenue in 2014 to 87,000 professionals and USD 3.3 billion in revenue in 2020, thereby implying 18% CAGR. Clearly, an annual growth rate of 18% for the next six years is nothing to sneeze at, it is a far cry from the hype that has been created about such data analytics outsourcing services from India and this article discusses the following myths that are related to this sector:

  • Myth Number 1 – Shortage of Data Scientists in the U.S can be fulfilled by those in India.
  • Myth Number 2 – Graduates in India can be converted into Data Scientists by providing 3-6 months of training.
  • Myth Number 3 – Data Management and Analytics Professionals from India can be charged at almost the same rates as those in the United States.
  • Myth Number 4 – Attrition within the Analytics Outsourcing Industry in India is low.
  • Myth Number 5 – This time it is different with Data Analytics Outsourcing.
  • Myth Number 6 – By creating a few “software macros” or home-grown visualization software, a Data Analytics Services company can differentiate itself to get a premium valuation.
  • Myth Number 7 – Valuations for Analytics Outsourcing Companies will be significantly higher than that of other KPO companies.

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