India: Favored Destination for Offshore R&D - By: Anand Kuppuswamy

Having gained global confidence in Software Development services, India’s natural progress towards developing cutting-edge high-end technology products is seeing it gain global acceptance and familiarity in its R&D Offshoring Services.

India, the favored destination for outsourcing of software development, is now powering her way towards becoming the most favored destination for offshore outsourcing of R&D as well. According to Zinnov, an offshoring advisory firm, offshoring R&D to India is a US$9.35 billion industry and is expected to witness a growth of 23 percent by 2012 to become a US$21.4 billion industry. The three focus areas of this industry being Software Product Development, Engineering Services and Embedded Systems.

Although it was the call centers and other low-end services that ignited the outsourcing boom in India, she has made rapid strides since and has quickly moved up the value chain. Today, several global technology companies are offsetting the shortage of highly skilled resources back home by leveraging India’s high intellectual caliber to enhance its R&D capabilities. The outcome is for all to see, with several of today’s high-tech products, be it advanced chips, software packages, or enterprise and consumer products, having a pivotal India contribution in them.

All together, India’s high-end technology prowess is being increasingly recognized in industry and business circles. A point in case is the increasing pre-requisite of venture capitalists requiring start up technology companies to have a India plan in their development efforts so as to receive funding. On the other end of the spectrum, several Fortune 500 companies are already outsourcing their software development requirements to India, and those that haven’t, are increasingly following suit.

India’s Natural Evolution to R&D Offshoring

Having gained global confidence in software services for a few years now, India’s natural progress towards developing cutting-edge high-end products has seen it also gain global acceptance and familiarity in its R&D offshoring services. Although R&D outsourcing was pioneered by the Information Technology vertical, R&D outsourcing in verticals such as Telecom, Automobiles, Manufacturing, Print & Publishing, Consumer Electronics, and Media & Entertainment, among other industries is now prevalent.

Cutting-edge R&D outsourcing is not new to India. The offshore R&D story dates back to 1985 when Texas Instruments set up its India R&D development center in Bangalore. Following suit, several global technology giants including Oracle, Intel, Cisco, GE, Microsoft, ABB, and LG among others have outsourced their R&D requirements to India. Over time, not just large, but also several medium, small and even startups have outsourced their R&D work to India, a practice that has now become the norm rather than an experiment. R&D outsourcing models range from captive to third party to contract assignments.

Ground Realities of R&D outsourcing to India

A few of the key factors that are driving India’s march towards becoming the world’s favorite destination for R&D offshoring/outsourcing include:
• Vast pool of technically qualified, trained and English speaking population
• Significant cost savings ensuing from evolved and proven models
• Time zone advantages facilitating 24/7 operations (follow-the-sun schedules)
• Geographical expansion with close proximity to key emerging markets, besides being a huge emerging market in itself
• Proven project-management experience resulting in better quality and timely delivery
• Strong intellectual-property management
• Conducive business environment with investor friendly laws
• Stable Government and booming economy

A few barriers that pose a serious road block in India’s ambitions of becoming the most favored R&D outsourcing destination include:
• Inadequate infrastructure
• Increasing costs
• Rising attrition
• Lack of recruitment bandwidth to hire and retain hard-to-find engineers skilled in research

India is also facing stiff competition from other offshore locations including China, Russia, and Israel. But then, it has to be mentioned these countries have problems of their own.

While it may seem that India is losing ground as a leading offshore R&D haven location, that’s far from being the case. Infact, to the contrary, offshoring to India is gaining momentum and is becoming a strategic imperative for global technology companies. India still offers significant cost savings, along with high quality for a significant value for pay. The Indian R&D market has reached a relatively mature stage to offer better quality, timely delivery, good management and clear roadmaps. This, along with other powerful factors such as India’s own market for local products, its proximity to other emerging markets, a vast workforce that’s experienced, innovative and yet cost-effective, and its wide breath of service lines, among other factors is seeing India well and truly on its way to becoming the leading destination for outsourcing of R&D.

Anand Kuppuswamy (Corporate Manager – Marketing & Strategy, Celstream Technologies Private Limited)

Anand is responsible for defining and implementing plans that drive strategic growth and expansion, and deeper relationship with customers.
Anand joined Celstream in 2005 as Business Manager, and was instrumental in winning new customers and made significant contributions in managing early engagements. Prior to joining Celstream, Anand was a Business Manager at Hewlett-Packard and earlier, a Technology Consultant at Verifone. Anand has deep experience in product development and program management involving global, collaborative teams. Anand has also worked with several Fortune 500 and SMB customers assisting them with their product development objectives including offshoring strategy and accelerated time-to-value.
Anand holds a Bachelors degree in Computer Science from BITS Pilani and a Post-graduate Diploma in Management from IIM-Bangalore.

About the Author

About Celstream Technologies Ltd.
Celstream Technologies is a successful, global Product Engineering Services company with a rich heritage in offering Networked Product R&D services. Celstream offers complete product life-cycle development services to technology companies in the Media & Entertainment, Consumer Electronics, Print & Publishing, and Enterprise industries. More information on the company can be found at http://www.celstream.com.

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