The Data Route To Millions
While graduating from the College of Business Studies, Delhi University, in 1990, Dhirendra Kumar discovered he had free time after classes. An avid collector of newspapers and magazines for nearly five years, Kumar used that time to put the publicly available information and data he had accumulated into neat Excel tables. After all, in a world before the Internet, mobile telephony and cable TV became the norm, access to information and data was primarily from the printed word.
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Kumar set up Value Research, a mutual fund research company, in 1990. His timing was perfect — in 1991, the government allowed public sector banks and institutions to set up mutual funds. While collating the data was not so difficult, getting users to pay for it was. Kumar started a mutual fund scorecard and tied up with The Economic Times. “I used to make around Rs 3,000 a month, which was not great, but enough for an individual at that time. For the first couple of years, we simply did not make money. But I decided against borrowing,” says Kumar. Also, there were no venture capital or debt funds to support him.
In fact, getting even a fixed line phone connection was tough. Kumar got a friend to transfer his connection to him. “While collating data is not too difficult, making money out of data is difficult; you need to have a reputation,” says Kumar. And that takes time.
Almost a decade later, the Internet emerged as a great tool. That’s when R.K. Thukral, who had brought out a data digest, UP At A Glance, in the early 1990s, joined hands with Madan Bahal, managing director of the Mumbai-based Adfactors group. In 2000, the two of them set up Datanet India, which collects, collates and compiles socio-economic data about India and its states and makes it available online. It started out with one website Indiastat.com. Today, with 60 employees, it offers India-, state- and sector-specific data across 720 websites.
Unlike Kumar, Thukral’s timing was off. Soon after he started operations, the dotcom bubble burst. “For a little over two years, we had a small team based out of South Extension in New Delhi that just compiled all the data that we could locate,” says Thukral. That paid off when Thukral got an email from the World Bank seeking data. That was followed by the Indian Institute of Management (IIM), Ahmedabad, signing him up. The venture achieved break-even in 2005 and started to make profits the next year. Today, Datanet’s clients include Harvard University, Stanford University, Massachusetts Institute of Technology, the London School of Economics and all the IIMs.
Around the same time, in 2000, Laveesh Bhandari, then a senior economist at Delhi-based think tank National Council of Applied Economic Research (NCAER) founded Indicus Research. The focus was on creating data products. Operating from an office in central Delhi, Indicus provides products that include district-level GDP figures, details of the Indian consumer market and data on towns and rural blocks. Clients include Samsung, PepsiCo India, Bharti Airtel, Apollo Hospitals, the Reserve Bank of India and ICICI Prudential.
Kumar, Thukral and Bhandari are among a bunch of entrepreneurs who are making millions selling data. Unlike earlier, consumers are now willing to pay a premium. For instance, Kumar has estimated annual earnings of around Rs 10 crore. While Thukral is unwilling to provide figures, it is estimated that Datanet makes close to Rs 5 crore annually. However, none of these data entrepreneurs is flashy. Even Dhiraj Rajaram, who runs India’s largest data analytics firm Mu Sigma, with annual revenues of $100 million and over 2,000 employees, drives a second-hand Land Rover.
The Data Rush
Increasing volumes of data being generated by the government, leading companies and industry associations is what is driving the data rush. According to a McKinsey report, during 2010, India alone stored 50 petabytes of new data (1 petabyte = 1 million gigabytes). The world added 3,500 petabytes. This is the inventory that companies are targeting.
Thukral aptly sums this up: “Data is the new oil.” As the years go by, the demand for data is rising phenomenally. And customers are willing to pay for it. Thukral points out that an institutional customer that paid just Rs 2,000 for data in 2007 now pays Rs 1 lakh for a suite of data services. That’s the market these companies are looking to tap. The Indian data market is estimated to be worth Rs 250 crore. Market research would add another Rs 100 crore.
Each of these ventures caters to different verticals of the data business: those that process public data for clients; or corporate data for quick decision-making; and then those that create their own products. There are also data analytics firms and the captive analytics wings of large corporations such as IBM, Dell and Accenture. Most data companies publish priced reports, magazines and newsletters, which give them additional marketing reach.
So is data mining the next big thing? While the demand is there, it is unlikely to generate as many jobs as, say, the IT or BPO industries.
The global rush into data mining began in the 1960s when Robert McNamara, then CEO of Ford, demanded data on virtually everything. Today, companies regularly take key decisions based on data generated and analysed. The Indian data story began in 1951 when the government set up the Central Statistical Organisation (CSO), which is now a wing of the National Statistical Organisation (NSO).
Says Pankaj Rai, director, global analytics at Dell: “The Vs — variety, volume and velocity of data — have changed significantly.” Adds C.K. Guruprasad, principal, global technology and services, at consultancy Heidrick & Struggles: “What we are seeing is not a fad. Large corporations are realising that data analytics plays a key role. So companies are looking at how to leverage or approach it.”
India’s biggest data company, Mumbai-based Centre for Monitoring the Indian Economy (CMIE), was set up by economist Narottam Shah in 1976. Also in Mumbai are Accord Fintech and Capitaline that focus on corporate data. A recent entrant is IndiaSpend, a data journalism venture of former journalist Govindraj Ethiraj. Delhi-headquartered Icra too has Icra Online. The data analytics play revolves largely around Bangalore. The biggest in the fray is Mu Sigma, followed by Chennai’s LatentView and Gurgaon-based AbsolutData and Fractal Analytics, all with 250-300 employees.
As important as data is the medium used to deliver it, and the current medium of choice is the Internet. Says Mahesh Vyas, managing director and CEO of 400-strong CMIE: “The changes effected by technology have been dramatic. We were the first to deliver databases electronically. Strange as it may sound today, it was revolutionary in 1988 when we did that.”
For the past decade or so, data was accessed primarily on PCs or in the form of CDs and printed publications. But, like everything else, data too is going mobile. Starting next year, Thukral will provide data across operating systems — iOS, Android and Windows 8 — on the cellphone. That could well be the future of data.
The Number Crunchers
Much of the action in the Indian data business began around 2000, mostly due to the availability of high quality mathematical and statistical talent. According to the McKinsey report, in 2008, India added over 13,000 fresh graduates with analytical talent. That’s the most after the US (24,730) and China (17,400). More importantly, the quality of work is of global standards while costs are lower than in the developed world. Guruprasad points out that in some MNCs, the India-based analytics team will be the largest it has anywhere in the world. Data and analytics companies have given a fresh lease of life to mathematicians, statisticians, economists and econometricians.
Bhandari, whose focus all along has been on Indian clients, says, “Companies that cater to the domestic market have innovation built into them, whereas large global companies follow standard procedures that are photocopies of each other.” However, the domestic market is smaller with lower profitability.
Apart from sourcing and presentation, the third leg of the data stool is quality. No data company admits to having problems on the data front. That’s what brought four young professionals with competencies in financial content, software development and database design together to set up Accord Fintech in Mumbai (2007). Rahul Kumar, the company’s CEO, says: “We realised that there were issues with the quality and accuracy of available data. Due to lack of competition, the focus was not on enhancement of quality and technologies.”
With a team of 250 professionals across eight cities, Accord gets data from sources such as annual reports, stock exchanges and the Registrar of Companies. This is followed by a process of extensive validation. Its clientele includes research companies, share brokers, private equity companies and industry bodies. The first couple of years were difficult, but with better technology and a focused team, they were able to make a dent in the corporate data business.
The entry of more companies into the data space has led to intense competition and better quality. While information on listed companies is available, the big demand that Kumar sees is on data relating to unlisted Indian companies.
|DHIRENDRA KUMAR Founder & CEO, Value Research Founded: 1990 Location: Noida Area of focus: Mutual funds “... MAKING MONEY OUT OF DATA IS DIFFICULT; YOU NEED TO HAVE A REPUTATION.”|
While the corporate sector generates a lot of data, the leader by far is the government. It is this market that IndiaSpend, a not-for-profit data journalism venture plans to tap. Nearly three years ago, on a trip to the US, its founder Govindraj Ethiraj had met Michael Klein, co-founder and chairman of the US-based Sunlight Foundation, a non-profit body that uses the Internet to promote openness and transparency in the government. “That’s when I thought we could do something similar in India,” says Ethiraj. He has modelled IndiaSpend on the lines of ProPublica.org, which does investigative journalism in the public interest.
IndiaSpend sources data from state governments, the Planning Commission, the Reserve Bank and other government bodies. “Apart from public data, we also file right to information (RTI) petitions,” says Ethiraj. Using the data, IndiaSpend brings out online reports that highlight issues that have been ignored in the national media. As a first step it provides syndicated content to Business Standard for a fee. The aim is to look closely at government data — after all it still generates close to a third of the total data in India.
Critical For Corporates
A lot of the new data is being generated by companies as well, but it is not being used effectively. Dhiraj Rajaram quit his job as a strategy consultant with Booz Allen Hamilton, Chicago, in 2005. The then 28-year-old engineer felt applied mathematics would help companies take decisions on the reams of data they generate.
Rajaram invested the $400,000 he got from the sale of his newly acquired home in the US and personal savings as seed money to set up Mu Sigma. “The first few months were very difficult. If getting clients was tough, convincing people to join a start-up was definitely tougher,’’ he says. Nine months after starting, Rajaram got his first client — Microsoft. Today, with 2,500 employees, Mu Sigma caters to at least 100 of the Fortune 500 companies.
If data is critical, then so is its security. Says Rajaram: “Our global delivery model ensures that data never leaves the facility.”
There are a clutch of much smaller data analytics companies in Bangalore and Gurgaon. Apart from these are the captive units of MNCs. Dell, for instance, has a 450-member team in Bangalore. But not all companies have large teams. Global retail chain Tesco has a 2-3 person team in India that helps the company save $10-15 million annually simply by analysing power consumption across stores. It also looks at stores veering away from average sales.
Says CMIE’s Vyas: “I see the data industry growing exponentially. What is critical is exploration of new content, innovation in data mining tools and specific application products.”
|GETTING THE MATHEMATICS RIGHT|
|India’s data companies need to thank the average Indian parents who focus on how well their children do in mathematics. Thanks to this national obsession, India is in a sweet spot as far as mass talent for data analysis is concerned. This has been the biggest driver for the data industry. While there is a huge base of students with engineering, statistics and mathematics skills, what they lack is business perspective. So companies tend to hire raw talent and train them in various aspects of business. While the mass talent is easily available, there is not enough talent at senior levels. The shortfall is met by tapping Indians returning after having done similar work in the US. However, demand is much higher than supply of talent. More importantly, the available talent needs to be trained. Companies are looking at various means to meet the shortage of trained people. Mu Sigma has set up the Mu Sigma University, Fractal Analytics has the Fractal Analytics Academy and Redwood Associates has set up Analytic Training Institute (ATI) where trainers help solve business problems with analytics. Laveesh Bhandari, founder, Indicus Analytics, says: “There is a very dynamic analytics industry in India. The biggest asset we have in India is human capital.”|
The real competition to India is from the US. According to Roy Cherian, co-founder and CEO of analytics company Marketelligent, the US is expected to be short of people with data crunching capabilities soon. Says Cherian: “We expect close to 100,000 people to be employed in the Indian data analytics business by then.” But while India has the talent, Singapore is all set to create a global analytics hub with its Infocom Development Authority looking to channelise data and analytical capabilities. That’s a lesson that India can pick up and quickly.
Adds Dell’s Rai: “Analytics is perceived to be the next big thing in the IT industry.” It is this hype that is driving newer companies into the analytics space. But will it be as big as IT? Seems unlikely, be it in numbers employed or revenues generated. But what is clear is that there is a huge gap in talent and services. It is to tap this market that Roy Cherian set up Marketelligent. Cherian says: “As a data user, I realised that there was a wide divide between talent and services.” The other reason for the rush into analytics in India is that the US is expected to face a shortage of 200,000 people in the analytics business by 2015. Cherian expects the bulk of that business to move to India.
But will all these data companies survive in the longer term? That depends. The CEO of one of the data companies says: “Every quarter we get an offer to be bought out by a large global player.” That could be critical for the survival of the first flush of India’s data millionaires. With many in the fray, expect a wave of consolidation over the next 3-4 years. Till that happens, they need to get their numbers right.
(This story was published in Businessworld Issue Dated 17-12-2012)