• Investment World
• eWorld
• Catalyst
• Mentor
• Life
• Canvas
• Praxis
• Urban Pulse
• Brand Quest

Vishwanath Kulkarni

BANGALORE, June 18

INDIAN software developers are increasingly churning out voluminous codes to produce newer products for global clients. In a perceptible drift from the traditional services development and maintenance work, there is a surge in product R&D outsourcing.

The new wave that is swinging the domestic software market could well save as much as 40-50 per cent in costs for global enterprises. The R&D outsourcing, restricted earlier to software products and telecom, is now spreading into various verticals like semiconductor design (system on chip), hardware design, consumer electronics, medical electronics, automotive electronics among others.

Indian companies like Wipro, Tata Elxsi and Sasken are seeing increased interest from product MNCs in these areas. ``We are witnessing a visible shift in R&D strategy, where companies are beginning to recognise that India is perhaps a good place to do a significant part of their R&D,'' said Mr G Venkatesh, Vice-President and Head Semiconductor Business unit at Sasken.

This trend is similar to the shift in manufacturing strategy in the last decade where China became the destination to do manufacturing. This was evident from the fact that the largest R&D workforce outside of the US for companies was in India for more and more companies, Mr Venkatesh added.

It may be recalled that Oracle recently announced that its India R&D operations would be 4,000 people, up from 2,000 currently and be 10 per cent of its global R&D workforce — the largest pool outside US. Cost management had become an issue for IT managers as R&D budgets were shrinking due to the slowdown, said Mr Ramki Shankaranarayanan, General Manager, Worldwide Sales and Marketing, Tata Elxsi.

``With budgetary constraints, outsouring R&D is no longer tactical, but becoming strategic to retain competitive edge and also to retain and gain marketshare,'' Mr Ramki said.

``There is a lot of cost benefit to a foreign player in outsourcing the product R&D work to Indian companies,'' Mr Ramesh Emani, Chief Technology Officer, Wipro.

Cost saving in R&D means that products that were unviable because of higher R&D budget requirements could now become viable. This may therefore lead to new revenue streams derived from the deployment of these products, Mr Venkatesh said.

``Once the foreign companies realise the cost efficiencies they derive by outsourcing to Indian companies, it is logical to expect them to rely more on the outsourcing model,'' Mr Emani said.

"In Wipro we are seeing good amount of interest from product companies in the areas of consumer electronics, automotive electronics, industrial automation, medical electronics, etc, in addition to the traditional outsourcers in IT and Telecom," Mr Emani said.

A lot of start-ups are also starting with R&D operations in India. In the past, start-ups used to come to India only during their growth phase, not before. Now, there is interest in the VC community to drive costs down by launching the company with R&D development based in India.

Send this article to Friends by E-Mail

Stories in this Section
Products majors shifting more R&D work to India

Copyright © 2002, The Hindu Business Line. Republication or redissemination of the contents of this screen are expressly prohibited without the written consent of The Hindu Business Line