Business

Analyst Firms Should Offshore Themselves

The irony is too strong to ignore. Gartner, Forrester, IDC and other analyst firms are all forecasting that outsourcing will continue growing rapidly. Yet not one is forecasting when industry analysis itself will move offshore.

With so many conceptual thinkers in these companies, someone has got to be running the numbers on what outsourcing means to their own firms. Gartner, with large numbers of analysts who crank out market forecasts weekly, and IDC, with its strong grasp of market sizing, forecasts and dynamics, seem ideally suited for offshoring some redundant research tasks.

Even Forrester, with a healthy quarter behind it, must be running pro forma financials about moving the heads-down research offshore. And offshore doesn’t necessarily mean Bangalore or other cities in India. It could just as easily mean the Philippines, where college graduates are being hired quickly to staff groups that do what many western analysts consider to be the drudgery work of their jobs: number-crunching and drilling into SEC documents to get the most valuable data.

Reuters Fast Forward

The hard work of research — comparing financial forecasts with actual outcomes, tracking profitability by product, using SEC documents to gauge the viability of small and mid-market vendors — doesn’t necessarily have to be done in Boston or London, as Reuters signaled with its announcement last month of its new office in Bangalore, part of its Fast Forward Program.

This program is aimed at cutting costs and reducing headcount by 3,000. Reuters is hiring 20 journalists to cover 2,000 small and medium-sized American companies listed on the New York Stock Exchange. It has 300 total employees at the research center in Bangalore and expects total staffing to grow another 300 in the next year, reaching a staff of 600 by 2005. That’s much bigger than some of the best-known industry analyst firms in the U.S. and just shy of the 1,000 analysts Gartner claims to employ worldwide.

Reuters insists this is not about cost reduction, but when you set the goal on the one hand of dropping 3,000 contributors and announce a new center in a part of the world known for salaries that are 25 percent of those in London and New York, it’s tough to buy the party line.

It’s all about cost reduction and new product development. Let’s all be honest and talk about wanting to be stronger competitors globally and quit apologizing for having to make the hard decisions. The U.S. will be stronger for all this outsourcing if we can just accept the fact that the process by which new products, services and most importantly intellectual property gets created is changing. It’s time for news, industry and financial analysis organizations to wake up and realize their core product — intellectual property — is going through a seismic shift.

Reuters is facing competitive pressure from Bloomberg and Thomson Financial and has to reduce costs while creating new information products to compete globally. At the heart of this offshoring effort is an implicit goal of redesigning the processes by which research is done. Cost reduction and new product development are the byproducts, but attacking a series of broken processes has to be at the center of Fast Forward, whether Reuters ever admits it or not.

Analyst Firms and Outsourcing

At its purest form, industry analysis is a relationship business. It thrives on renewals, which are core to the business model of nearly every analyst firm. Upsetting those relationships by pointing clients to an analyst half a world away is seen as potentially catastrophic. But many of these research and advisory firms need to do just that if they are going to reduce costs and generate new products.

Reuters is changing how it does research while building an organization that has the potential to deliver results 24/7. Research and advisory firms will have to follow suit.

Given the growth trajectory global outsourcers, it’s amazing that not one of them has acquired its own analyst firm already. The information needs inside these rapidly growing outsourcing firms could easily keep any industry and advisory firm of 50 or more analysts scrambling.

Infosys will enter and excel at enterprise-level application consulting, systems integration and global deployments. Sooner or later the information needs inside high-growth companies like Infosys will grow to such a level that acquiring an analyst firm will make sense. They will need that depth of insight and market data to excel.

Conversely, any analyst firm must realize that without a steady stream of new, insightful research, it will eventually fall apart. That’s why having industry analysis in places like Bangalore or in any population center with highly educated workers makes so much sense.

Reuters has floated the trial balloon for outsourcing financial and industry analysis. Most likely it will deliver the results expected. The analyst firms you work with will need to embrace the same global strategy if they want to keep product development moving forward while reducing costs. If they don’t, a competitor — maybe one not even in existence yet — will.


Louis Columbus, a CRM Buyer columnist, is a former senior analyst with AMR Research. He currently works in the software industry.


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