IT MNCs maintain R&D expansion spree in India
A recent report published jointly by the National Association of Software and Service Companies (NASSCOM) and Zinnov Consulting states that the Indian subsidiaries of multinational firms that continue to expand their operations in the region contribute over 20 per cent of the revenues earned by the Indian IT industry. The report further states that these MNCs have actually comprised approximately $11 billion, which is almost 22 per cent of the export revenues of the Indian IT and BPO firms during the 2010 fiscal year that ended on March 31 last.
Stating that the export earnings earned by the Indian subsidiaries of IT MNCs, mostly from the US and European nations, has grown three times during the last seven years, the report says that presently there are as many as 750 MNC subsidiaries in India employing over 400,000 professionals.
According to an online report, in addition to tech firms that have their R&D centers in India, several major service vendors, such as Accenture, IBM and Hewlett-Packard (HP) too have established their operations in India with a view to serve their international customers. Besides, several financial service companies and banks too have established their back-office operations in India to take the benefit of inexpensive personnel in the sub-continent.
In fact, MNCs that establish subsidiaries in India for their non-core activities, including IT and BPO services, with a view to make savings are now exploring ways to monetize their finances and transfer their work to outsources having operations in this country. Previously, they had no alternative, but to perform even their non-core jobs in-house, as the outsourcing industry was in its preliminary stage in India.
Industry experts are of the view that firms establishing operations in the country with a view to develop core products are expected to continue expanding in India. On the other hand, a number of companies are utilizing a hybrid form in India which enables them to execute their core activities in-house at their subsidiaries, while outsourcing the non-core jobs. Microsoft is said to be an ideal instance of utilizing such hybrid model in this country.
The report released by NASSCOM and Zinnov Consulting states that the major fragments of the MNCs’ Indian subsidiaries that are engaged in R&D and engineering operations make up $4.8 billion in export earnings. Similarly, the subsidiaries engaged in IT and BPO services constitute $3.4 billion and $2.9 billion in the country’s export earnings from outsourcing. According to NASSCOM, a number of subsidiaries of these MNCs not only provide significant cost savings, but their output too is higher compared to the parent organization.
The report concludes with the suggestion that there is a need to localize global processes providing more administrative facilities to the India centers of the MNCs even as they maintain their global systems.