International O.R.: State of analytics & O.R. in India

An opportunity to drive better business performance in an emerging mega-marketplace.

By Arnab Chakraborty and Michael Svilar

Operations research in India

India’s booming economy is projected to grow from 6 percent to 7 percent over the next year, making it a ripe target for O.R. & analytics.

Emerging markets such as India are no longer viewed solely as low-cost sourcing and production locations.   Emerging markets are also becoming an important source of consumer demand. As developed economies struggle to recover from global economic pressures coupled with shrinking consumption demand, India is poised to become one of the world’s top-five consumer markets. India’s  economy grew at 9 percent from 2003 to 2008 and is currently projected to grow from 6 percent to 7 percent over the next year. In contrast, developed economies are projected to grow at 1 percent to 2 percent during the same time frame.

The acceleration in domestic demand in India is being fuelled by the rise of the middle class population and increasing disposable incomes. According to Asian Development Bank estimates, India’s middle class will explode over the next four decades, reaching 1.2 billion by 2030. In addition, India’s rural markets, which were previously underserved, present a large a pool of untapped demand. These developments, coupled with a favorable investment climate in sectors such as retail, telecom, financial services and utilities, is bringing FDIs (foreign direct investment) into India to tap the business opportunities and growth potential that exist in the nation’s marketplace.

Driving growth in emerging markets

As global companies enter the Indian market, the following key imperatives will be critical to creating a sustainable growth trajectory:

  1. Understand the 1.2 billion customer base and the specific customers segments in India.
  2. Develop products and solutions that match up with the unique customer needs and expectations.
  3. Build customer loyalty through innovative pricing and customer services models.
  4. Establish innovative distribution channel models to reach across various cities, towns and villages in a cost effective manner.
  5. Enable better governance, transparency and efficiency of the government machinery.
  6. Improve the infrastructure and utilities eco-system in India to foster a growth agenda in India.

In regards to these issues, many business managers and policy-makers still tend to base decisions on instinct and experience. The disciplines of data science and advanced analytics offer a big opportunity to make decisions based on facts, thus making them more precise and accurate. Using the techniques of data mining and predictive modeling and operation research principles, businesses can help identify growth segments, target customers intelligently with right offers, optimize allocation of scarce resources, streamline distribution networks for differentiated service levels, improve the efficiency and effectiveness of business process and mitigate potential risks due to environmental hazards and utility failures.

During the last 10 years with the technological advances and various e-governance initiatives in place, the data ecosystem in India has improved significantly and is getting better each day. Initiatives such as the Unique Identification project and Credit Information Bureau (India) Limited have been very helpful in creating a robust data eco-system. Simultaneously, mobile communications, the Internet and social media are all increasing their penetration throughout India, generating additional sources of information that can be leveraged to derive key insights around customer behavior.

Application of analytics and O.R.

The journey to analytics and O.R. maturity is gaining momentum in India. Large national conglomerates and multinational corporations operating in India are becoming aware of the potential of applying analytics and data science for solving business problems. Accenture expects the various enterprises in India to go through a journey of improving the analytical maturity from stage 1 to through stage 5 as shown in Figure 1.

Operations research in India

Figure 1: Journey of analytics maturity (© Accenture 2013).

According to Accenture, organizations that continue the path of investing in analytics will have a significant potential to tap the growth opportunity in the Indian market and will out-perform its competition. Following are some of the relevant application areas of analytics and O.R. in the context of India:

Retail: India has emerged as the fifth most favorable destination for international retailers, outpacing UAE, Russia, Indonesia and Saudi Arabia. India’s retail sector is worth $350 billion, has a low organized retail penetration of 5 percent to 8 percent and is growing at a compound annual growth rate (CAGR) of 15 percent to 20 percent.

With FDI now allowed, large multinational retailers and consumer goods companies are finding huge opportunities in India. With competition on the rise, retailers have realized the power of business analytics to build predictive models on transactions and loyalty card data to customize their promotions and give customers a holistic shopping experience. Retailers can also use O.R. techniques to help optimize category assortment and manage shelf space allocation that could result in higher profitability.

Telecom: Mobile phone subscriptions continue to grow rapidly in India, having already increased nearly 70 percent (CAGR) over the last decade. Previously, service providers were primarily inclined to get people on board and inflate their subscriber base numbers. Today, however, in a country with a population of 1.2 billion, mobile phone penetration has already reached 160 percent to 170 percent in urban areas (due to many individuals having more than one phone).

Since customers have the choice of switching operators with the MNP (mobile number portability) facility, the service providers are now focusing on retaining their existing customer base and preventing customer churn by reaching out to them proactively and providing value added services (VAS). Most telecom companies in India have their own analytics teams with a huge focus on customer retention and revenue generation while coming up with innovative loyalty programs for customers.

Financial services: The banking and insurance sector in India has been a major and mature adopter of analytics and O.R. because of its early investment in technology and data ecosystem. Most of the banks in India are very aware of the potential of analytics to define targeted, multi-channel campaign strategy and to drive event-based marketing solutions. There is also an increased focus on using analytics and O.R. techniques for establishing robust risk management processes.

Digital revolution: India has been making strong progress over the last decade in embracing the digital revolution. The explosive growth in mobile communications serves as a key enabler. The Internet broadband penetration in India is expected to grow rapidly in coming years. There is also a very strong adoption of social media and a growing adoption of e-commerce channels for consumers to shop and transact. This presents a very unique opportunity to drive advanced analytics to help understand consumer behavior, as well as help monetize the digital data by enabling real-time offers and commerce opportunities.

Smart grids: Energy losses during transmission and distribution in India exceed 30 percent, one of the highest rates in the world. Intelligent-energy solutions such as smart grids offer potential to help make urbanization more sustainable by addressing power-supply inefficiencies in India’s cities.

Characteristics of analytics market

Certain nuances of India’s market need to be considered for delivering analytics/O.R. services and capabilities:

1. Different industries have different levels of maturity and appetites for analytics and O.R.
The financial services sector was an early adopter of predictive analytics. Most of the prominent banks in India have a built in-house analytics center.

High-tech industries have a good analytics infrastructure because of good technology adoption. Companies are now focusing on deploying descriptive analytics and will evolve toward predictive and prescriptive analytics in future.

The retail sector has a very specific focus of applying O.R. and analytics techniques to drive efficiency in their supply chain and store operations.

2. Different motivations exist across industries to adopt analytics.
Most of the motivation for companies that are strong adopters of analytics is to help drive fact-based decisions to foster revenue growth. As a result, the predominant analytics solutions are in the area of customer, marketing and sales analytics.

In industries such as financial services, risk analytics is an important area to help identify potential operational and portfolio risk through deployment of sophisticated risk models.

The telecom industry, on the other hand, has had robust growth and is now a saturated market. Hence, the focus areas for analytics is to increase customer loyalty, increase revenue per customer, reduce operational costs, data monetization and optimize network operations.

3. The data eco-system is evolving.
The data environment in India outside the financial services and telecom sectors is not very matured and quite fragmented. The transactional systems are mostly in place across organizations. However, operationalizing an analytical data repository is a challenge since the availability of third-party bureau data around customers is evolving. As a result, the sophistication of analytical initiatives is constrained by the maturity of the data eco-system.

4. A consultative approach is needed to help drive awareness and appreciation about analytics.
Large, mature enterprises in India are aware of the potential of analytics and most have set up a BI function within the organization to begin the journey. However, the not-so-large companies are getting warmed up to the possibilities of applying analytics and O.R. in business decision-making. Many of the experienced individuals rely on their gut and past experience for making business decisions. The challenge is to convince and convert them to move into a fact-based, decision-making process.

Hence, there’s a strong need to conduct awareness workshops, consulting pilot projects, etc. to win the confidence and buy-in of key stakeholders in organizations for deploying analytics.

Analytics deployment in India

The typical journey to deploy analytics within an India business context will follow three distinct phases as shown in the Figure 2.

Operations research in India

Figure 2: Approach to analytics deployment (© Accenture 2013).

The journey includes the following steps:

  1. Pilot project: It will start with a small pilot to help demonstrate initial results and get the stakeholders excited. This is a good way for showing the potential of analytics and O.R. within a defined scope.
  2. Proof of concept: This will establish a strong proof point around particular analytics solutions with defined outcomes. The outcome of a proof of concept helps to establish a larger analytics road map.
  3. Long-term engagement: Once businesses have experienced the success through pilots and proof of concepts, they generally prefer to go into a long-term analytical journey. At that point the businesses will need help with the analytical capacity, capability and access to best practices and tools. This forms the basis for a long-term engagement model that can be delivered by an outsourced analytics service provider or built in-house.

Imperatives for analytics service providers

The following are key imperatives for analytics service providers operating in India:

  1. Understand the local challenges of the existing data eco-system and collaborate with businesses and government to elevate the maturity of the data ecosystem. This will help in accelerating the adoptions of analytics and O.R. in India.
  2. Start small with a consulting project, build credibility and develop champions in the businesses for larger analytical initiatives.
  3. Help businesses in execution and operationalization of the analytical insights into the business processes. This will enable the businesses to see the action and outcome of implementing the analytics solution and will increase confidence and buy-in for further adoption.
  4. Wrap around a strong change management approach for deployment of analytics service/solution to help client teams embrace and adopt analytics.
  5. Explore opportunities for driving analytical innovations to solve business problems in India’s market. Some of the solutions developed for India’s market might have more leverage for other emerging markets as well as developed nations.
  6. Drive thought leadership and create IP/assets in the field of analytics that will help in long-term sustainability of the analytics endeavors in India.

With one of the largest and fastest-growing economies in the world, combined with one of the largest pools of analytics/O.R. talent in the world, India offers a unique opportunity to apply the disciplines of analytics and O.R. India has been playing a key role in supporting the analytical needs of developed markets. Now India is well positioned to leverage its talent pool and the knowledge/experience from developed markets for servicing its domestic demand, which will set India apart in the analytics space from other developing nations such as Russia, Brazil, China and South Africa.

As more success stories of analytics driving high performance and competitive advantage in India emerge, those stories will drive still wider adoption of analytics in the private and public sectors, opening up more possibilities for research and collaboration between academia, businesses and government.

Michael Svilar, based in Washington, D.C., is a managing director, Client Services and Global Lead, Accenture Analytics. Arnab Chakraborty (, based in Bangalore, India, is a managing director, Industry Solutions, Accenture Analytics.