China and other factors threaten India’s R&D prowess
After several outsourcing initiatives like the IT, business process, knowledge and legal outsourcing, comes a new outsourcing. It is difficult to label it as an outsourcing but Research & Development (R&D) outsourcing is the latest addition.
Research and Development is the last thing any company would outsource. But, companies tried outsourcing it and found it very successful. R&D outsourcing is an estimated $9.35 billion annual business and is growing at 23%. It would touch $21.4 billion in 2012 as per estimates. Companies can do 3 times more research than in the US.
Companies like Cisco, Motorola and HP are preferring India for their R&D operations. The number of companies outsourcing R&D rose from 180 in 2000 to 594 in 2008. R&D ranges from new chips, software packages to telecom devices.
The average cost per employee rose 16.2% in the past 3 years. Still India is one of the preferred destination for R&D. Why?
- In spite of rising wages, it is still cheaper to hire an engineer in India vs US.
- Growing quality and experience of the workforce which is not available elsewhere in the world.
- The wage inflation is going to plateau.
But, R&D outsourcing in India is plagued by a few factors. This is what Vivek Paul had to say about R&D in India :
There’s a big difference between discovering something, versus discovering something that you know somebody else says can be done. That difference is the difference between the service business and the products business
India brings its strong services background into R&D framework. Unfortunately that is not how R&D works. Innovation does not come by following directions. It comes by leading.
That ‘following someone’ factor coupled with a Chinese threat is threatening India’s R&D prowess. As with many other things Chinese threat is real in R&D too. India and China are competing fiercely in the services business, foreign investments and natural resources. Is there something where India and China doesn’t compete? There is one. Its Olympics.
India has filed 766 patents for the year of 2008. China has filed a whopping 6089 patents for the same period. Advanced countries like the US and Germany has filed more patents but the difference between China’s patents and India’s patents is glaring.
Chinese threat and being told what to do are the two biggest threats to R&D outsourcing in India. For India to move up the ladder, R&D and innovation should come within. India should lead instead of following someone else’s lead.
*Image source : IRRI images