Offshoring of R&D services to Emerging Markets Expected to Increase
According to Zinnov Management Consulting, an advisory firm in outsourcing, there is likely to be a larger ratio of offshored R&D services to emerging markets like India, Eastern Europe, and China. The demand for outsourcing to these markets is expected to increase in 2010 in line with global economic recovery, despite flattish budgets estimated for R&D.
The Hindu Businessline reported that Zinnov projects R$D outsourcing to add 10% on average in 2010. This figure is up from the suggested growth of 6-7% in 2009. Incidentally, the total offshore market for R$D in 2009, following the effect of the economic downturn, was projected to hit between $19.7 - $20.3 billion. This figure compares to last year's $18.7 billion.
Ironically, big firms have not slashed their budgets for R&D. Nonetheless, offshoring to the aforementioned markets (India, Russia, Central Europe, and China) is likely to stay flat for the current fiscal year. Approximately half of the R&D services offshored goes to India. Following close behind is China in second place and the Eastern European countries in third.
CEO of Zinnove, Pari Natarajan, commented that the consultant firm expects offshoring in R&D to spike at least incrementally. He said this observation was based on client interaction. Zinnov provides assistance to clients in developing offshoring strategies for R&D.
Smaller outsourcers are likely to be affected by a move for clients to consolidate their vendor base, while lower cost and a vast talent pool are the major drivers of the offshoring process for R&D.
Natarajan continued to say that the world economy is looking at some spots of recovery, i.e. India. Regions such as Germany and China are also showing improvement. Although there may be some modifications in the present market dynamics, continued growth of interlinking between businesses worldwide and service providers is likely to occur. Indian service providers top the list of Zinnov's R&D repertoire.
TCS, Wipro and HCL Technologies are clearly the market leaders as far as overall rankings are concerned - the rankings stem from factors like sheer capabilities, financial strength, business models, people strength, expertise and innovation, and operations. Others listed on the top ten include MindTree, Aricent, Tata Elxsi, Symphony, Tech Mahindra, GlobalLogic and Sonata Software.
The rankings utilized by Zinnov are the result of analysis and study of the top R&D outsourcers in India, Eastern Europe and China. Vendors who failed to participate in the study include Infosys, Patni computers and Sasken.