Is India becoming the new centre of innovation?

by Editor 10/3/2008 4:47:00 PM

Businesses have outsourced computer network and management jobs, as well as a number of simpler IT roles, or used contractors to cut costs for years now. Research and development jobs, however, in the opinion of some managers, should not be outsourced, as they are crucial to a company’s mission. For this reason, they should be kept inside the company and not handed to outsiders.

This is now changing. A number of global companies have begun to offshore research and development projects to India. They do this either by contracting Indian companies or by hiring workers in the country.

Vamsee Tirukkala, co-founder and managing partner of advisory firm Zinnov, says: “Innovation is now coming from global locations much more than in the past. Once you have the products, you can customize and localize them for the local audience.”

IT giants such as Google and Intel believe that outsourcing research and development will not only save them money, but also help them discover new talent in the region and speed up product development.

Paul Spence, global leader of outsourcing services for Capgemini finds that outsourced research and development projects can incease profit and per-employee sales because attempts to avoid the usual risks of product research often hinder a product from getting off the ground. Outsourcing, he says "makes the most sense for companies with long product development cycles." 

Today, there are almost 600 development centres in India, compared to 180 in 2000. Businesses will spend approximately $9.4 billion on research and development services in the country this year, according to a new Zinnov study. More than a half of the sum will be spent on development centres by American tech companies such as IBM and Motorola.

The study, based on a survey of managers at almost 600 development centres, also shows that, over the last 10 years, 30,000 Indian employees have returned home after being employed at tech firms in Europe and North America.

The overall R&D spending in India is expected to rise 23 percent each year, to $21.2 billion by 2012, according to the study, and this income will come mainly from the big Indian outsourcers such as Wipro and Infosys Technologies.

Infosys already provides R&D services to many different companies, from startups to multinationals. Infosys associate vice president of product engineering Ram Kumar says: “Our vision is to establish Infosys as the leading R&D hedge. We want to be a one-stop shop from the product concept to design, to validation and engineering.”

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