• Posted by: Technology Staff Editor
• On: 03/24/2008 10:39:03
• In: Information Technology

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BENGALURU, India — The rate at which multinational companies are establishing R&D centers in India has slowed significantly, according to a study on the outsourcing of R&D.

For the next 18 months, larger R&D centers will focus on increasing their staffs, but the study found that few technology companies will establish new R&D centers in India.

Study sponsor Zinnov Management Consulting Pvt. Ltd. said it found that the managers of existing multinational R&D centers are coping with rising costs, attrition and low productivity, especially compared to research centers in the U.S. Moreover, the study found that many Indian-based R&D centers have had problems ramping up their operations.

There are an estimated 594 multinational R&D centers in India employing 146,760 workers. Most are here (312), followed by Pune with 96, the New Delhi area with 87, Hyderabad with 55 and Chennai with 39. Of these, 115 focus on telecom and networking, 75 on semiconductors and EDA tools and 48 on consumer electronics.

Ninety-three new centers were established in 2004, but that total dropped to just 24 in 2007.

With the majority of R&D centers (283) employing more than 100 workers, the annual cost for smaller Indian operations has risen between 8 and 15 percent. Annual attrition rates range from 8 to 20 percent.

Worker productivity at smaller Indian R&D centers was up to 40 percent lower, said Pari Natarajan, chief executive of Zinnov Management Consulting.

Scaling up R&D operations has also been a problem for small and medium-sized centers. Still, Natarajan added, "there is no question that India is much cheaper than elsewhere and there are signs that attrition is stabilizing."

The growth rate for new R&D centers here is expected to remain low for the next 18 months as mid-size companies partner with others to maintain R&D while controlling costs, the study found. And large companies are not likely to increase R&D employment here anytime soon.