India No More Hot Offshore R&D Centre

Few companies will look at India as their destination for offshore R&D centres in the next 18 months. In fact, there is already a sort of slowdown in the number of such units being set up in the country. From 75 new offshore R&D centres in 2005, the number has dwindled to just 15 last year. There are about 600 MNC captives in India and R&D offshoring activity in the country is estimated $6 billion and is seen as growing at 23%. Software product development captures over 50% of R&D market, with the balance contributed by embedded systems space.

According to a study by Zinnov Consulting, some key reasons for this trend were cost escalation of 8% to 15%, attrition of up to 20%, difficulty in scalability and lack of recruitment bandwidth. However, the silver lining is that many of the large and established R&D cenres will lend a lot of buoyancy to R&D activity from India.

In fact, large companies will grow till their head count reached 30%-40% of their global R&D workforce, the study says. While there are several challenges, what has worked for some of the successful R&D captive in India is stable and strong leadership team that has spent a good number of years to stabilise the centre.

(Ref: The Economic Times dated March 15, 2008)