SUNNYVALE, CA--(Marketwire - August 11, 2008) - Zinnov, a leading management consulting firm, today released the results of its first annual study on the R&D landscape in India. The report, entitled "Strategic Guide on Indian R&D Centers, 2008," reveals India as a top choice among multinational companies for research and development across verticals, particularly in enterprise software, telecommunications and networking. The study uncovers a larger workforce of R&D talent than previously thought, and underscores the country's reputation as an affordable location to establish and operate R&D centers.

The study reveals that, multinational corporations still find immense value in establishing offshore R&D centers in India, as illustrated by a remarkable leap from 180 centers in 2000 to nearly 600 in 2008. The report also projects that the R&D offshoring market will grow from its current share of $9.35 billion to over $21 billion by 2012, representing a CAGR of 23 percent over that period (see Figure 1). Majority of this growth will be driven by large R&D centers of these multinationals and by service providers.

The report indicates that this trend towards offshoring of R&D is primarily driven by an increase in the available talent pool in India over the last five years. However, Zinnov believes that cost savings will also continue to be a driving factor for these multinationals to show interest in offshoring product development to India. While recent industry reports have indicated that the cost of doing business in India is rising, it is still comparatively less expensive than that in the United States. In fact, the report highlights that the cost per employee has grown at a rate of about 16.2 percent between 2005 and 2007. However, this growth rate is expected to become a little sluggish with the controlled increase in compensation levels and stability in real estate prices.

India's Growing Talent Pool

While cost savings drove the first wave of offshoring to India in the 1980s and 1990s, the report states that it was between 2003 and 2005 that multinationals started leveraging India for its large talent pool base and growing local market. (see Figure 2 and Figure 3).

Zinnov's research indicates that approximately 250,000 engineers currently work in India's R&D ecosystem of which about 140,000 work for R&D centers of multinationals and the rest with service providers. With a huge number like 140,000 engineers working in R&D centers, Bangalore has the world's second largest R&D talent pool (Silicon Valley has the largest).

Reasons for Increase in India's Talent Pool

Until five years back, multinationals used to primarily offshore work related to product testing and other low complexity aspects of product development to India. In many cases, India centers were treated as extended teams of their main centers in the U.S. and Europe. However, now with the local Indian talent maturing, multinational companies are giving complete ownership to their India centers to develop and deliver their products. And, while the average full product ownership in the India R&D centers is around 10 percent today, this number is projected to increase to 30 percent by 2012. The various factors that account for this trend include the following:

--  The introduction of new technologies over the past five years -- such
    as SaaS, SOA, open source and Cloud Computing -- has created a level
    playing field for Indian developers.
--  Returning expatriates: The report showcases that 30,000 Indian
    expatriates have returned to India in the recent years after working in
    product companies in the U.S. These individuals have rich experience in
    designing and delivering products.
--  The number of graduates from IIT and other top Indian universities
    relocating to the United States has been declining in India as new and
    exciting opportunities are available within the country itself. This trend
    is expected to have a significant impact on the industry in the next five
    to 10 years on the industry.

Looking forward

Product management and architect skills, specifically, are hard to find in India at the moment. However, the number of Indian-based workers with these skills is expected to increase in the next three to five years due to the increasing experience in the existing R&D teams as well the number of expatriates returning to India. This situation is expected to further fuel the product development/innovation capabilities in India.


Data in Zinnov's "Strategic Guide on Indian R&D Centers, 2008" were compiled from primary and secondary research from India's 594 captive centers. Research was derived from a combination of questionnaires and interviews with the senior managers/country heads of over 300 of the centers and a sampling analysis of all 594 during the November 2007 to March 2008 period. The respondents, located across major cities in India as well as their U.S. counterparts, were queried on best practices, cost details, governance, transition road maps, project types and models, innovation capability at the India centers, and the outlook for all these parameters.

About Zinnov LLC

Founded in 2002, Zinnov -- meaning Zeal in innovation -- is a leading management consulting company providing services in the area of Offshore Advisory, Market Expansion and Human Capital Optimization to Fortune 1000 companies. They work collectively with clients to tackle prevailing organizational challenges by analyzing the changing dynamics, improving performance, and building institutional capability. The services delivered to their clients through advanced reasoning and analytical techniques, provides solutions that help in integrating organizational vision, business definition & processes.

Contact Information: For more information, contact: Kinjal Chhetri Zinnov LLC Email: Ph: +1-408-716-8432 Michael Lindenberger BOCA Communications Ph:+1-415-531-1449