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Monday, March 17, 2008

companies will look at India as their destination for offshore R&D

Though India is witnessing a slowdown in its offshore R&D activities, fewer companies will look at India as their destination for offshore R&D centers in the next 18 months.In 2005, there were 75 new offshore R&D centers in India. The number has dwindled to just 15 last year. There are about 600 MNC captives in the county where R&D offshoring activity was estimated at $6 billion and is seen as growing at 23 percent. In the total R&D market, software product development captures over 50 percent, with the balance contributed by embedded systems space. Some key reasons for this trend were cost escalation of 8 percent to 15 percent, attrition of up to 20 percent, difficulty in scalability and lack of recruitment bandwidth, says a study by Zinnov Consulting. However, the silver lining is that many of the large and established R&D centers will lend a lot of buoyancy to R&D activity from India.In fact, large companies will grow till their head count reaches 30 percent to 40 percent of their global R&D workforce, the study says. Though there are several challenges, stable and strong leadership team help some of the successful R&D captives get stabilized.On future possibilities, Zinnov Consulting CEO Pari Natrajan says, Indian R&D centers would be at the center of conceptualization, design and development of low-cost products like cars, mobile chips and consumer software products. "Business model innovations will be experimented to tap the SMB market place," he adds.Small companies may use third party services and temporary contractors to control costs while mid-sized firms, who followed the collaborative model, may move into own captive centers.

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