Wires

Shopping or browsing on Main St? India's Big Data firms know

By Harichandan Arakali and Raju Gopalakrishnan

BANGALORE, Oct 8 (Reuters) - Shopping in a U.S. departmentstore? Surveillance cameras may be watching, and not because youmight be a shoplifter.

In minutes, video of which aisles you visited, what productsyou picked up and put down, what you bought and the displaysthat caught your fancy will be sent to a company in Bangalore,India.

"These logs can be analysed to determine propensity topurchase, what a customer's intent, satisfaction, sentiment is,"said Dhiraj Rajaram, CEO of Mu Sigma, which says it is among theworld's biggest pure-play data analytics companies.

The business of storing, decoding and analysing unstructureddata - think video, Facebook updates, Tweets, Internet searchesand public cameras - along with mountains of facts and figurescan help companies increase profits, cut costs and improveservice, and is now one of the world's hottest industries.

It's called Big Data, and although much of the work is donein the United States, India is getting an increasing slice ofthe action, re-energising an IT sector whose growth has begun tofalter.

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One reason for the emergence of Big Data as India's next bigthing in IT is the dramatic fall in the costs of storing andworking with huge volumes of data with the advent of cloudcomputing and open-source software programmes such as Hadoop.

"There are hundreds of (analytics) boutiques in India rightnow. Every other week I hear some of my friends have started ontheir own," said Santosh Nair, who quit a job in an IT servicesprovider four months ago to open Analytic Edge.

The Bangalore firm has studied pharmacy sales, populationtrends and other data to help a U.S. funeral company pinpointareas for its marketing campaigns.

SERVICES NATION

Others are getting into the business of data storage andprocessing as costs plummet.

"It doesn't mean I need a server which has 50 terabytes ofspace. Cloud technology helps me rent space which is cheap,"Nair said. "Ten terabytes of space might cost me about $500 amonth. It's not expensive."

That amount of data is equivalent to about 20,000 hours ofCD-quality music.

Globally, data output last year was estimated at 1.8zettabytes - 1.8 billion terabytes, or the equivalent of 200billion full-length high-definition movies.

Millions of networked sensors in cameras, mobile phones andother devices, along with spiralling output from social mediasites, are contributing to the data explosion, said a report onBig Data last year by the McKinsey Global Institute.

This has great potential for businesses, it said.

"We are on the cusp of a tremendous wave of innovation,productivity and growth, as well as new modes of competition andvalue capture - all driven by Big Data as consumers, companies,and economic sectors exploit its potential."

As India stakes its claim in the knowledge-intensivebusiness of Big Data, however, it stands to lose much of thecost advantage that helped it to dominate business-processoutsourcing.

Instead, industry officials say, India's success will dependon its large numbers of maths-savvy IT engineers and the skillsits IT industry has picked up over 15 years as the world'sbiggest outsourcing destination.

"The Indian cost benefit is eroding significantly," saidMahinder Mathrani, operating partner at the Symphony TechnologyGroup, a Palo Alto, California-based private equity firm that isin the software and services field.

"In the big data analytics space, it will be more abouttalent arbitrage," he said. "Good statisticians who have a blendof business acumen and analytic skills and also technicalaptitude aren't inexpensive, even in India."

POOL OF TALENT

India's pool of talent will be in demand, with dataanalytics specialists seen globally in short supply for years tocome as Big Data takes off.

But the Indian industry also believes it will gain anadvantage from its broader expertise in services.

"We are a services nation," said Sundararaman Viswanathan, amanager at Zinnov, a software consultancy in Bangalore. "Forexample, we had the Internet and we built the outsourcingindustry around it. We are extremely good at it."

"We can build a service which is around asking the rightquestions, and putting together the insights and giving it tothe customer."

India's National Association of Software and ServicesCompanies (Nasscom) forecasts that the Big Data business inIndia will be worth as much as $1.2 billion within three years,a six-fold increase from current levels.

That would be double the growth rate it expects for Big Dataworldwide: to $25 billion from $8.25 billion.

"It's an industry where, because of cost, skill, languageand ability to learn, India stands a very, very strongadvantage," said Rajeev Baphna, CEO of Bangalore-based dataservices company Analyttica.

"India started to focus on creating a space in this field byleveraging a number of advantages it has: One, talent; two, theability to have a very strong process-driven delivery at lowercosts that the services industry has mastered."

It's not just boutique firms that have entered the field.The giants of India's outsourcing such as Infosys Ltdand Wipro Ltd have also moved into the Big Databusiness, but smaller firms may be better placed to deliver.

"The larger, well-established companies have a challenge,"said Symphony Technology's Mathrani.

"Their existing business models preclude them from beingnimble. This is not about migrating work already being donesomewhere else. It's about solving business problems for whichno specification exists."

GROWTH IN OUTSOURCING Globally, Big Data is used in a multitude of applications.

IBM Corp has a team of 5,000 crunching data to helpoil companies find, extract and process oil more efficiently.

General Electric Co said in May it could spend up to$1.5 billion to acquire data analytics companies, aiming to minemultiple data points and find ways to extend how long gasturbines, jet engines and other heavy equipment can run withoutunscheduled maintenance.

In retail, the scope of Big Data is enormous. McKinsey hasestimated that a retailer using Big Data to the full, includingtrends from social media such as Twitter and Facebook, canincrease operating margins by more than 60 percent.

Healthcare, insurance, banking and other financial servicesare also big users.

For India's IT industry as a whole, the surge in Big Datacomes at an opportune moment.

India's exports of software and IT services, which make upthe outsourcing industry, should grow 11 to 14 percent to $77billion to $79 billion in the year ending March 2013, accordingto Nasscom. But this is a tapering off from 20-plus percentgrowth a few years ago.

In addition, outsourcing and offshoring in the financialindustry - about 30 percent of the total - has come under fireand will likely face stricter supervision after recent lapsesinvolving offshore units in India.

These include accusations by the New York State bankingregulator in August that Standard Chartered Plc hid$250 billion in transactions with Iran and that the entireforeign asset compliance process of its New York branch wasoutsourced to Chennai, India, with no evidence of any oversightor communication between the Chennai and New York offices.

In Big Data, however, while the revenue numbers are stillsmall, the mood is upbeat.

"We think this is just the tip of the iceberg," said Rajaramat Mu Sigma. "The world is only going to change faster andfaster and faster. There will be more data, more algorithms,more applications, more new technologies."

His eight-year-old company is growing rapidly, and theaverage age of his 2,000 staff is about 25 or 26, he said.

"It's like hiring a bunch of Tony Starks, train them on theIron Man Suit and they go out and defeat the bad guys."

(Editing by John Chalmers and Edmund Klamann)

((Raju.Gopalakrishnan@thomsonreuters.com))

Keywords: OUTSOURCING INDIA/