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March 18, 2007

Why did Marketics sell out?

Analytics outsourcing firms, though highly profitable, cannot scale beyond a stage. This is why pioneering marketing analytics outsourcing firm Marketics - with estimated revenues of $5-6 million and highly profitable - chose to sell out (for $65 million to WNS), according to an Economic Times analysis quoting K. Ganesh, angel investor in the company who earlier founded BPO firm CustomerAsset (acquired by ICICI OneSource).
“Indian analytics companies are facing a significant challenge in scaling up. It is easy to get to $4-6 million but extremely difficult to get to $40 million,” says Jaswinder S Chadha, CEO, marketRx, a New Jersey based analytics and market research firm.

The analytics business in India is relatively new and has a handful of players like Marketics, Fractal, Pharmac and Kandor. Industry experts say that barring a few companies like Evalueserve (estimated revenues $30-40 million) and marketRx ($40 million), the rest are still small.

“Can an analytics firm grow to $100 million? Yes. Can it grow to a billion dollars? The answer is no,” says Ganesh. He says analytics unlike the BPO or IT services is not inherently scalable. “We started both businesses in CustomerAsset at the same time, in the second year the analytics business was doing only $10,000 a month but our call centre business had gone up to $700,000 per month,” says Ganesh.

The analytics business may be small but it is highly profitable. It is the high profitability of the business, which has attracted companies like WNS to it. Analytics gets billing rates of $20-120 per hour compared to BPO business, which has rates of $8-13 per hour.

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of information and networking services to the private equity and venture capital ecosystem in India. View free samples of Venture Intelligence newsletters and reports.