India's number one position in IT R&D offshoring in danger news
07 August 2008

India is likely to lose its number one position in IT R&D offshoring as the cost of labour had risen among other factors, Pari Natarajan CEO of Zinnov, said.

According to Zinnov, a management consultancy company, IT R&D offshoring to India had flourished in the early part of 2000 as the setting up cost was low, abundant talented manpower, improved infrastructure and increased knowledge on domain.

However, according to a study carried out by Zinnov, cost is no longer a prime factor for foreign companies to set up offshoring R&D operations in India but seek to value the skilled R&D talent pool and emerging market opportunities in countries like China, Russia, Vietnam and Eastern Europe who have been aggressive in luring these companies.

The value addition that Israel and Taiwan gave brought the US and other western countries who looked for the offshore model to their doorstep as these countries had their own experienced research and technology personnel and had been innovating for the market. This became the prime factor in what they were able to provide than the cost factor.

''We expect the R and D offshoring industry to grow at CAGR of 23 per cent in an optimistic market scenario, wherein majority of the growth would be driven by large R and D centers and service providers. 'Most of the R and D centers in India are small firms with a global revenue of less than 100 Million US Dollars and operate mostly with less than 100 full-time employees,'' Pari Natarajan said.

This could be corrected if the salary paid was in accordance to the performance and in order to have the competitive edge the training modules had to be increased.

Zinnovs research, also says that now centres in India are determined to become high-value centers and to achieve this they are repositioning their senior personnel posted abroad back in the country to lead the operations.

The R&D done in India is still in its budding stage viz a viz Asian countries like Japan, South Korea, Taiwan and Israel as their system was favorable for large MNCs compared to India where the R&D systems were made by the MNCs themselves.


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India's number one position in IT R&D offshoring in danger