Data Annotation - Billion Dollar Potential Driving the AI Revolution

Artificial intelligence holds the key to an era of innovation and is increasingly becoming pervasive in our lives. Businesses across sectors are leveraging the transformative potential of AI for data-driven decision-making. However, at the core of the AI revolution lies the need for large training datasets, something that most enterprises are struggling to address. Data annotation and labelling services play a critical role in bridging this gap by helping enterprises with quality training data for their AI models. This report attempts to highlight the huge potential that India has to become the data annotation and labelling hub for the world. The study demystifies the data annotation landscape, market serviced by India, and the potential impact that the industry can create both in terms of job creation and accelerating India’s AI readiness.

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Key Findings

Data Annotation Overview: A Global Perspective

Global data annotation spend on third-party solutions is estimated to be 7X by 2023 as compared to 2018, constituting about 1/4th of the total spend on annotation
Two building blocks needed for data annotation services are a trained workforce and an efficient annotation platform to operationalize labelling
Crowdsourced platforms and managed service providers offer different value propositions depending on client requirements across cost, scale, security, quality and agility
~70% of global players are in the intermediate to advanced phase of maturity with sustainable at-scale and diversified offerings

Global data annotation spend on third-party solutions is estimated to be 7X by 2023 as compared to 2018, constituting about 1/4th of the total spend on annotation Two building blocks needed for data annotation services are a trained workforce and an effic

The data annotation market serviced by India in FY20 valued at ~USD 250 Mn - with ~60% of the revenues derived from US clients
The India market revenues are derived from multiple business models with managed services contributing ~65-70% of the overall market
Indian MSPs leverage either a dedicated workforce or a BPM partnered model with >80% of the employees from non-metro cities
India’s competitive edge stems from its decades of service delivery experience and is driven by key pillars of cost, infrastructure, talent and innovation

Indian Players: Current Maturity, Challenges and Opportunities

Data annotation industry in India is still gathering pace with ~75% players in the initial and growth phase
Challenges restricting Indian MSPs’ access to markets include data privacy, lack of cultural context & growing demand for non-English language data labelling
COVID-19 posed several challenges for MSPs with an FTE workforce; requiring the MSPs to alter their operating model to ensure business continuity
Opportunities for players are driven by advanced market access, expanded offerings, catering to advanced annotation and sector specific needs

Outlook and Recommendations

Data annotation market serviced by India can exceed USD 7 Bn. by 2030 with a potential of up to 1 Mn. workforce engaged via full-time and part-time employment models
Roadmap for service providers comprises of ensuring existing capabilities and developing new capabilities for them to unlock maximum value
Impact of data annotation on India – Job growth and accelerated AI readiness, transforming India to an AI-ready nation
Boosting domestic AI demand, unlocking public sector datasets, developing strong data policies and infrastructure and capital support to MSMEs will fuel the India data annotation market growth

Data Annotation - Billion Dollar Potential Driving the AI Revolution

Key Findings

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