Outsourcing to India shifts to R&D

K.C. Krishnadas
(09/17/2004 9:37 AM EDT)

  BANGALORE, India — India, the favored destination for the outsourcing of software development, is also attracting outsourced research and development projects, according to a new study.

The study by Research and Markets of Ireland found that R&D outsourcing to India will grow from $1.3 billion in 2003 to $8 billion by 2010.

Growth in R&D outsourcing has been boosted by the outsourcing of services. Now, overseas companies that used India as a low-cost base are beginning to exploit Indian technical expertise.

As many as 150 R&D centers have been established in India. Texas Instruments Inc. led the way in 1985, followed by Intel, Motorola, IBM and Cisco. Recently, Advanced Micro Devices indicated it will design and develop a new processor from its center here.

"In India, R&D outsourcing existed even before 'outsourcing' became a fad," the researchers said. Outsourcing models for R&D vary — from captive to third party to contract assignments — and the pioneers are from the information technology industry, Research and Markets said.

The success of Indian R&D centers was attributed to factors such as good management, an emphasis on quality, strong ties to universities and clear roadmaps. The growing number of R&D centers also built on the successes of pioneering companies, the study found.