Strategic_Guide_Indian_R&D_Centers

Strategic Guide on Indian R&DStrategic Guide on Indian R&D
Centers 2008
Unveiling the R&D Offshoring Scenario in India
Industry Report
May 2008
Zinnov LLC

Global R&D spend is expected to grow at a CAGR of 3.5 per cent with
Europe and Japan emerging as equally competitive R&D spenders
1250
R&D* Spend by Geography (2008)
Global R&D* Spend
(2005 – 2010)
Europe1150
1200
1250
DBillion)
CAGR 3.5 %
p
30%
North
America
43%1050
1100
1150
Dspend(inUSD
Japan
22%
43%
950
1000
1050
GlobalR&D
900
950
2005 2006 2007 2008 2009 2010
Year
ROW
5.26%
*Note: It includes R&D spend by various other industries such as engineering services with embedded systems R&D, Energy, Consumer, Healthcare, Industrial
domains etc.
References: Computing Research Association, EIU, European Industrial Research Management Association, OECD
Zinnov Analysis
Year

R&D offshoring constitutes 14.4 per cent of the total offshoring to India with
R&D centers commanding 62.7 per cent of the market share
60
Indian Offshore IT Market 2008
(in USD billion )
R&D Offshoring Market Size 2008
( in USD billion )
50
60
R&D
Centers
62.7%
Billion)
30
40
enue(inUSDB
20
Vendors
37.3%
Reve
0
10
IT R&D ITES Total
Total = USD 9.35 Billion
R&D Offshoring (2)IT Services (1)
Total OffshoringITeS (1)
Total =USD 64.85 Billion
Source: Nasscom, Zinnov Analysis
1- Market size includes exports and domestic revenues
2- R&D includes Software Product Development, Embedded Systems and specific areas of Engineering Services

The R&D offshoring industry can be sliced into three horizontals
Definition
Software Product
Software development is the translation of a user need or a product idea into an operational
computer based software. The product development lifecycle includes conceptualization,
i t ifi ti t l i d d i d t d l t t ti d
Horizontals
Software Product
Development (SPD)
requirement specification, system analysis and design, product development, testing and
maintenance. It encompasses skill sets in Application Development, Systems Programming,
Web Technology Programming, Network Programming, Database Programming , User
Interface design, Product Planning, Program Management , Manual Testing, Automation
Testing, SCM etc.
Embedded Systems
An embedded system is an electronic system designed to perform pre-designated functions
in a machine. It is used like an embedded device/chip in a end-product coupled with other
mechanical software parts. Its acts as interface between hardware and software of an
electronic system by providing a means to give instructions to hardware of the system ItEmbedded Systems electronic system by providing a means to give instructions to hardware of the system. It
includes skills in embedded programming, hardware designing, manual and automation
testing. It also includes developing firmware which is designed to be augmented into an end-
user product like mobile phone, automotive system, aviation systems etc.
Engineering Services
It includes development of software catering to engineering requirements of various industries
like mechanical, automotive, aerospace etc. Engineering services R&D includes stages of
product lifecycle—Product Design & Development, Design Support, Engineering Analysis &
Modeling, Prototype Build, Testing, Verification, Validation, Manufacturing Engineering
Support, Knowledge based Engineering, Technical Publishing and other product support
( f ) factivities, PLM (Product Lifecycle Management) etc. It needs a diverse set of skills across
mechanical engineering, computer software hardware engineering and electrical engineering.

The three horizontals have been segmented across eight industry verticals
DefinitionVerticals Examples
It includes pure play semiconductor firms working on embedded
systems like chips.
EDA /
Semiconductors Intel nVidia AMD
It includes firms developing software to be augmented into another
device serving as an end-product for a user-based functionality.
Consumer
Electronics
It includes firms developing software for usage in telecom products
T l &
LG Samsung Philips
It includes firms developing software for usage in telecom products.
It includes mobile applications, networking software, graphical user
interface designing.
Telecom &
Networking
It includes firms working on software related to operating systems,
systems level programming, networking including protocols, security,
remote connectivity etc.
Software
Platform &
Systems
Cisco Avaya Siemens
Novell Linux
Sun
Microsystems
It includes firms working on enterprise applications like ERP, CRM.
Enterprise
Software
Products
It includes firms working on development of online software
applications for B2C software products like internet search desktop
Consumer
Software
SAP Intuit Oracle
Google Yahoo Amazonapplications for B2C software products like internet search, desktop
search, online space.
Software
Products
It includes firms developing automated systems like notebooks,
mobile computing accessories, PDA, servers, desktops, scanners,
Tablet PCs etc.
Computing
Systems
Google Yahoo Amazon
HP FujitsuIBM
It includes firms manufacturing products like automotives, aerospace
which have computer software and hardware as an integral part of the
end- product functionality.
Manufacturing Ford Daimler Chrysler Boeing

R&D offshoring in India started way back in the 1980s; it gained momentum
only after 2002 and is now poised for the next phase of growth
Growth Factor Value FactorEvolution of R&D Offshoring
Exploration Identification Growth Harvest
Access to Local
market
Skilled R&D talent
Need for innovation
Availability of
skilled talent
Potential for
cost-savings
Need for innovation
Potential for
cost-savings Spree of Product
Development firms
Entry of Texas
Instruments
Dot-com
Bust
Entry of
Microsoft
Entry of
Motorola Few Product
development
firms exit India
1980 1990 1995 1998 2000 2002 2004 2006 2008 2010
Years
Inflection PointGrowth triggers

Between 2003 and 2005 a large number of MNCs came to India for setting up
R&D centers
181
180
200
MNCs Setting up R&D Centers in India
140
160
Centers
82
93
87
80
100
120
berofR&DC
36 38
53
24
40
60
80
Numb
0
20
On or
B f
2001 2002 2003 2004 2005 2006 2007
Before
2000
Source: Zinnov Research
Year of Establishment
Total 594 R&D
Centers

Currently there are 594 R&D centers in India operating in SPD, Embedded
Services and Engineering Services
Embedded Systems
Illustrative
D l hi LSI C M l
Distribution of R&D Centers – 2008
y
120
Engineering Services
84
tersin
ts
Delphi LSI Corp. Motorola
Altair Engineering Arvin Mentor BMW
B h Caterpillar Ford
OfR&DCent
ogySegment
GoogleMicrosoftYahoo
Bosch Caterpillar Ford
Software Product
Development
390
ercentageO
Technolo
HP
IBM
Oracle
Philips
Adobe
Sunguard390
P
IBMPhilipsSunguard
KeteraSynygyYodlee
Total 594 R&D
Centers

These R&D centers are spread across various verticals: enterprise software
products and telecom & networking are the key verticals
55
51 594
Vertical Distribution of R&D Centers – 2008
115
48
55
82
75
153
Consumer softw are Softw are platforms/
Systems
Telecom/Netw orking Computing systems Total
15
Enterprise
Software
Software
Platforms/
ManufacturingConsumer
Software
Telecom &
Networking
Computing
Systems
TotalConsumer
Electronics
Semiconductor
/EDASoftware Platforms/
Systems
Software Networking SystemsElectronics/EDA
Total 594 R&D Centers

About 49 per cent of the total R&D centers in India have revenues less than
USD 100 million
22200+
Revenue vs. Headcount Analysis for R&D Centers
283 Total = 594
40100 - 200
50 - 100
184
86
90
adcount
184
Hea
76
135
13
10
309 28
45
14
32
10 - 50
51
15
6
1910
1 - 100 100 - 200 200 - 500 500+
Global Revenue in USD Millions

70 per cent of the smaller R&D centers focus on software product
development
Revenue vs Horizontal Segment Analysis for R&D Centers
33
Engineering
Services
Revenue vs. Horizontal Segment Analysis for R&D Centers
283
Total = 594
45Embedded
Systems
184
56
S ft
184
206
28
23
Software
Product
Development
51
76
37
48
98
6
58
51
1 - 100 100 - 200 200 - 500 500 plus
Source: Zinnov Estimate
Global Revenue in USD Millions

About 53 per cent of the engineering services R&D centers have a
workforce of more than 200 engineers
25
Headcount vs. Horizontal Segment Analysis for R&D Centers
Engineering
Services
175
158
Total = 594
30
14
11
64
Services
Embedded
Systems
139
122
15
25
20
120 116
87
25
Software
Product
Development
67
200+100 - 20050 - 10010 - 50
Headcount Range
Source: Zinnov Estimate

Bangalore, NCR and Pune together comprise the majority of R&D setups
with about 494 centers operating from these 3 cities
f & C
Bangalore 312
Location Distribution of R&D Centers
Pune
Software Product
Development
95
NCR
Development
Embedded
Systems
87
Hyderabad
Chennai
Engineering
Services
57
32
Others
Total = 594
11
0 50 100 150 200 250 300 350
Source: Zinnov Research, Zinnov Analysis
Number of R&D Centers
Note: “Others” include cities like Chandigarh, Ahmedabad, Coimbatore, Nashik, Mumbai, Kolkata

Currently the R&D offshoring industry in India is worth USD 5.83 Billion —
software product development being the dominant segment with 53 per cent
of this marketof this market
Market Size of R&D Centers – 2008
(As per technology segments)
Engineering
Services
21%
Software Product
D l t
Services
53%
26%
Embedded
Systems
Development
Total Market Size is USD 5.83 Billion
Source: Zinnov Analysis

Most phases of the software product development value chain are currently
being offshored to India
Software R&D Value-ChainSPD Embedd ES
Product
Concept
Design Development Testing Support
Software R&D Value ChainSPD Embedd
ed
ES
Objective
To conceptualize a
new product idea
catering to customer
needs.
Design a scalable,
high performance
modular product
Ensure that a high
quality, defect free
product is ready
Provide technical
support to
customers
Developing a product
based on user-
requirements.
►Product Development ►Unit/ Interface Testing
►Component/ Feature ►Technical Support
Commonly
Offshored
►Feature Definition
►Project Planning
►Product Maintenance
►Re-engineering and
Migration
p
Testing
►Regression Testing
►Testing Automation
►Product Validation /
Acceptance
(Level 1 & 2)
►Performance
Benchmarking
High
Potential
►Prototype Design /
Architecture
►Technology
Evaluation
►Prototype
Development
►Requirements
Gathering, Analysis
►Software
Architecture
►Requirement
Management
►Program
Management
►Technical Support
(Level 3 & 4)
►Shared Services
(F&A, HR, IMS,
Professional
Development
►Prototype
Validation
Architecture
►Project
Management
Services,
Documentation
services)
Not Being
Offshored
►Concept Definition
►Concept Evaluation
► High-Level Design
of Product Concept

SPD is estimated to be a USD 3.15 billion market in India with enterprise
products segment owning the largest market share of about USD 0.97 billion
SPD Embedd ES
Market Size of R&D Centers – 2008 Software Product Development Industry
Verticals – 2008
25
SPD Embedd
-ed
ES
20
25
22%
n
Telecom &
Networking
15
19%
31%
einUSDBillion
Enterprise Software
Products Software Platforms
& Systems
5
10
3% 18%
Revenue
Semiconductor /
EDA
Others
0
5
Software Product Embedded Engineering Total
3%
7%
18%
E b dd dSoftware Product Engineering
Others
Computing
Systems
Software Product
Development
Embedded
Systems
Engineering
services
Total
Embedded
Systems
Software Product
Development
TotalEngineering
Services
Source: Zinnov Estimates

In the case of embedded systems, India is gradually expanding its
capabilities—high-end R&D in embedded domain is yet to be offshored
Embedd-
Conceptualization
Design &
Development
Prototyping Verification &
Validation
Embedded R&D Value-ChainSPD
Embedd-
ed
ES
• Static & dynamic
Analysis
P l t d
• Firmware & diagnostics
• Application software
• Embedded soft are
• Prototype study
Software
• Understanding the local
need
• Pre-layout and
Post-Layout
Verification
• Regression testing
• Functional testing
• Embedded software
• Digital/Analog IP
• RTOS
• Device drivers
• Board support package
• Prototype tapeout
• Prototype building
P i
• Requirement
Documentation
• Product conceptualization
Functional testing
• Reliability testing
• ATPG test vector
Generation
• Package QA
• Stacks • Prototype testing
• Prototype analysisHardware
• Core design & architecture
• Model building
• Algorithm evaluation and
layout
• Cost analysis and future
• PCB design
• Substrate design
• Manufacturing Test
• Qualification /
Application test
• Field test
• Cost analysis and future
compatibility
• Design specifications
Substrate design
• Verilog coding
• Platform porting
• Board/ System design
• VLSI Design
FPGA • Substrate testing
Present & Near-Term R&D Offshoring Future & Long-Term R&D Offshoring
• FPGA
• ASIC/SoC/SiP

The R&D of embedded systems is currently estimated to be a USD 1.54
billion segment in India with telecom & networking as its largest vertical
SPD
Embedd-
ES
25
Market Size of R&D Centers – 2008 Industry Verticals of Embedded Systems – 2008
SPD
ed
ES
20
25
23%
Consumer
Electronics
15
40%
nUSDBillion
Telecom & Networking Semiconductor
/ EDA
5
10
19%
Revenuein
Manufacturing
Others
0
5
5%
13%
E b dd dSoftware Product E i i
Others
Software Product
Development
Embedded
Systems
Engineering
services
Total
Embedded
Systems
Software Product
Development
TotalEngineering
Services

Engineering services in India is catching up towards high-end offerings
Engineering Services Value-ChainSPD Embedd
ed
ES
Product
Conceptuali-
zation
• Conceptualizing product functionality
• Benchmarking of process, product and costs
• Designing the aesthetics and usability of product
• Market Research, Cycle Simulation
• Preliminary Design Analysis
Level of OffshoringComplexity
Product Design
and Modeling
• Complete product design including assembly
• Component design on CAD, Pro E, Design
Automation, Drafting and 3-D modeling, Conversions
between different platforms
Design &
• Conducting virtual simulations of designs to study a
part, sub-system or system for its behavior in operating
environment
• Optimizing product performance under real-lifeEngineering
A l i
g
Development
Product
Realization
influencing factors such as temperature, vibration, fluid
flow, fatigue
• CNC / CMM Programming
• Casting, Forging and Fabrication Engineering
• Manufacturing of
Analysis
Realization
(Manufacturing
Engineering
Services)
• Technical Support, Design Support
• GIS- Document Conversion, Legacy Conversion
• Manufacturing of
– Assembly Jigs and fixtures
– Ground Support Equipments
Product
Support
GIS Document Conversion, Legacy Conversion
• Re-Engineering / Reverse Engineering
• Acceptance and Test Procedure
• Component Maintenance Manual
• Illustrated part catalogue, Service bulletins
Low Medium High Low Medium High

At present, it is estimated as a USD 1.27 billion market with the
manufacturing domain constituting USD 0.52 billion of the total market
25
Market Size of R&D Centers – 2008 The Industry Verticals of Engineering
Service – 2008
SPD Embedd
ed
ES
20
25
20%
Semiconductor /
EDA
15
42%
16%
nUSDBillion)
Manufacturing Telecom &
Networking
5
10
9%
Revenue(in
Consumer
Electronics
0
5
7%
6%
E b dd dSoftware Product E i i
Software Platforms
/ Systems
Computing
Systems
Software Product
Development
Embedded
Systems
Engineering
services
Total
Embedded
Systems
Software Product
Development
TotalEngineering
Services Total = USD 1.27 Billion

R&D offshoring market is expected to grow at a CAGR of 23 per cent till
2012 with the growth of vendors catching up faster than that of R&D centers
25
Growth in Indian R&D Market, 2008-2012
25
R&D centers vs. Vendors : Market Share
17.4
21.4
20 20
n
21.40
n
11.5
14.215
9.5
15
etinUSDBillion
44%
etinUSDBillion
9.410
11.9
3.5
5
10
Marke 56%
9.4
Marke
37%
0
5
5.8
0
2008 2012
63%
2008 2009 2010 2011 2012
Years R&D Centers Vendors
Source: Zinnov Estimates

146,760 professionals—out of an installed base of 2,53,060 R&D talent in
India—are engaged with R&D centers
Installed R&D Talent Pool in R&D Centers – 2008
(As per technology segments)
Installed Talent Pool R&D – 2008
23%
Embedded
52%
Software Product
Development
Embedded
Systems
58%42%
Vendors R&D Centers
25%
Engineering
Services
58%42%
Total = 1,46,760Total Talent Pool = 2,53,060

Bangalore houses about 80.8 thousand of R&D talent; Pune has the next
highest talent base of 22.3 thousand professionals
Bangalore
Installed R&D Talent Pool Across Locations – 2008
80,885
Pune 22,382
NCR 20,319
Hyderabad 13,126
Chennai
Total = 146,760
10,048
1000 16000 31000 46000 61000 76000
Installed Talent Pool

Availability of highly skilled workforce and need for more innovation are the
major drivers for offshoring R&D to India
Conceptual
Key Drivers Description
Ability to foster innovation by leveraging the potential
Importance of the driver
Global Product
1
Conceptual
y y g g p
of the talent pool available across different nations and
their proximity to growing markets.
Differences in compensation levels and operating costs
ti i d t di t f i
Global Product
Development
Cost Competitiveness
2
across nations varying due to diverse set of economic
conditions.
Availability of domestic market opportunities in a particular
geography which can be tapped to grow business of a
Cost Competitiveness
Local Market
3
geography which can be tapped to grow business of a
company.
Availability of well qualified, English speaking, skilled
and MNC-suitable workforce
Opportunities
Skilled Manpower,
Fresh Talent
4
Availability of service provider firms operating in similar
businesses and bolstering the IT ecosystem of the
and MNC suitable workforceFresh Talent
Vendor Supply Base
5
country
Note: ‘Importance of driver ‘ indicates how global firms prioritize their motivations for establishing an India center for R&D. It is purely a qualitative rating
based on Zinnov’s observation across key product development firms globally.

India has emerged as a prime contributor to the global R&D capabilities of
MNCs—it is now seen as a high-value hub for innovations
1
Companies with R&D
centers in India
INNOVATIONS – INDIA
Yahoo Hotjobs, Yahoo! Kids, Yahoo! Avatar, Mixd, Yahoo! Podcast Service, Farechase and SMS back-up
Adobe
Page Maker 7.0, Frame Maker, RoboHelp, PostScript, Acrobat Reader on handheld devices, Acrobat Reader on
Linux, Photoshop Album Starter Edition, and Premiere Elements.
Oracle
Fusion Middleware (Identity management and application sever team), Oracle Database, JD Edwards,
Oracle Integration Products & Discoverer and Retek
Intel
Woodcrest, Tulsa, Clovertown, Tera Research Chip (50 per cent developed from India), Centrino mobile
platform, Teraflop processor, Xeon and Santa Rosa.
Texas Instruments
India Engineering Center has contributed to key products - Application Server 7.1, installer and packaging for
Java Enterprise System 1, portal server, Web server, Identity Server and Meta Directory
IBM
Hursley DDC, WBI Adapters DDC, Rational Products, Linux Technology Center, OS/2 DDC. IBM India center
also provides support for diverse products i.e. Web Application Servers, WBI, Middleware Technologies, OfficeIBM p pp p pp , , g ,
Automation Products, Distributed File Systems and Operating Systems
Symantec
India center works on complete ownership model for products like Security 2.0, Information 2.0, File System
Analyser, AIDA (Automated Inference of Data center Anomalies) and Malware variance
Cisco
India center key contributed to development team of 7500 router platform, WAN technologies, BPX switches.
Small Network Management Solution (SNMS) and Cisco Emergency Responder (CER) was completely
conceived and developed entirely in India.

The cost of product development in India is about one-third of that in the
U.S. However, value-based benefits are now gaining ground over cost
competitiveness
6
competitiveness
Annual Cost per FTE - Headquarters in the U.S. vs. R&D Center
in India
$180,000 $180,000
USD)FTE/Year(U
Cost
differential of
about 1:4
$120,000
Cost
differential of
about 1:3
$120,000
Cost/F
$60,000 $60,000
$0
Captive US (West Coast)
$0
Captive US (East Coast)

Scalability, productivity and cost escalation are some of the key challenges
faced by R&D centers (1/2)
Cost Escalation
• Headquarters are concerned about the increase in cost at R&D centers
• Companies ha e seen a cost increase of 8 per cent to 15 per cent ear o er ear
1
Key Challenges
Cost Escalation • Companies have seen a cost increase of 8 per cent to 15 per cent year-over-year
• Cost increase is the higher at smaller R&D centers due to difficulties in resource
optimization
Th tt iti l l t R&D t f 15 t t 20 t A
Attrition
• The attrition levels at R&D centers range from 15 per cent to 20 per cent. As
companies don’t have a concept of bench strength or buffer resources, the impact of
attrition is higher compared to IT services firms
• Attrition related best practices such as structured knowledge transfer, resource
shadowing are not common at R&D centers.
2
• R&D center heads seem to easily get bored once they have completed the hiring
process for the India center
• R&D centers who are growing at a smaller pace and R&D centers whose global
revenue is stagnant encounter higher attrition at the senior levels.
Management
Stability
3
Process
Adoption
• R&D centers have minimal processes. The Headquarters are not able to accurately
track the progress of the projects
• As R&D centers are a part of the organization, it is very difficult to enforce process
4
revenue is stagnant encounter higher attrition at the senior levels.
Adoption p g , y p
discipline only at the India R&D center.

Scalability, productivity and cost escalation are some of the key challenges
faced by R&D centers (2/2)
Scalability
• R&D centers are not able to hire at a rapid pace. They need resources with a varying
level of skill set and capability. They don’t have the recruitment bandwidth to screen a
5
Key Challenges
Scalability p y y
large number of engineers
• Lack of career options makes it difficult for them to attract good talent from IT services
firms.
Productivity
• Productivity at the India centers tends to be 30 per cent to 40 per cent lower than
that among the U.S. resources
• Lack of product roadmap clarity or delays in decision making in the U.S. results in
significant idle time for the engineers
• Quality of the talent, lack of domain expertise and lower experience levels are
6
Quality of the talent, lack of domain expertise and lower experience levels are
considered as the major reasons for lower productivity at the India centers.
• R&D centers are liable to pay taxes as per the transfer pricing regulations in India. The
Indian subsidiary is liable for the tax on the profits generated from the activities
undertaken at the India location7
Tax
undertaken at the India location.
• Transfer Pricing Technique is used to determine the profit attributable to the subsidiary
unit. The price of services rendered by the PE to the head office or by the head office
to the PE is calculated on an arm’s length basis, i.e., a price which is applied in a
transaction between persons other than associated enterprises On an average it
7
transaction between persons other than associated enterprises. On an average, it
amounts to about 15 per cent over and above the total operational costs of the India
center.

2007 witnessed a 10 per cent to 15 per cent increase in the operating
costs of the R&D centers due to salary escalation and rupee appreciation
1
Cost Escalation in India Operations (YoY)
People costs accounts for about 62 per cent of the operating costs of R&D centers
16.2%
Year(USD)
30,470
34,665
41,117
eCost/FTE/
2005 2006 2007
Average
Note: Onsite Location is assumed to be US

The cost per FTE in embedded systems R&D is higher than that of software
product development and engineering services R&D
Parameter SPD Embedded Systems
Engineering
Services
TotalTotal
(Cost per FTE per
annum in USD)
41,117 45,228 36,121
P l C t 50% 78% 52% 78% 55% 72%People Cost 50% - 78% 52% - 78% 55% - 72%
Infrastructure and
Facilities 9% - 25%
12% - 25% 10% - 22%
Communication Travel 3% - 20% 5% - 20% 8% - 15%
Government/Regulatory
1% 5% 1% 5% 1% 5%
Go e e t/ egu ato y
Cost
1% - 5% 1% - 5% 1% - 5%
Professional Services
Cost
3% - 13% 3% - 13% 3% - 13%

Most of the R&D centers in India incur an operating cost of USD 35,000 to
USD 55,000 per FTE/ year
6%
100%
Total Operating Cost/FTE/Year
24%
75%
Centers
100%40%50%
ageofR&D
18%
25%
Percenta
12%
0%
<USD 30,000 USD 30,000 to
USD 35,000
USD 35,000 to
USD 45,000
USD 45,000 to
USD 55,000
>USD 55,000 Total
, , ,
Cost/ FTE/ year
Note: Based on the sample of companies of different sizes across domains, studied by Zinnov
Source: IDC forum; Zinnov Analysis

Best Practices: Companies have tackled cost escalation by addressing
various aspects of their operations
1
Productivity Improvement
1
25
Best Practices
People Cost OptimizationTax/Professional Services
34
Infrastructure OptimizationTravel and Communication

Bangalore has the highest number—312 R&D centers followed by Pune
and NCR with 95 and 87 centers respectively
T t l N b f
25
7
7
3
Total Number of
R&D centers
87
23
17
22
City Name
10
NCR
13
20
33
95
57
312
29
13
Pune 16
16
9
16
H d b d
84
62
77
6
12
32
Hyderabad
Bangalore
0 - 50
50 - 100 200+
100 - 200
Headcount Range
89
84
Chennai
9
5Bangalore50 00
Note: NCR includes Chandigarh , Pune includes
Mumbai, Other locations account for about 11 R&D
centers
Total R&D Centers = 594

High availability of desired talent pool makes Bangalore the top choice;
Pune has recently emerged as a high-growth R&D location
L ti A t* f R&D CitiLocation Assessment* of R&D Cities
Low ‘Medium Potential’‘Follower’
Chandigarh
TalentPool
Coimbatore
bilityofR&DT
Pune
NCRHyderabad
Chennai
Bangalore
Availab
High
Cost Perspective** HighLow
‘High Potential’ ‘Frontrunner’
Note: * Position of bubbles indicates the attractiveness of a location as an R&D destination.
**Cost Perspective: takes into consideration set up costs and operating costs
Cost Perspective HighLow

Bangalore and Pune are the best locations for setting up R&D centers,
Chandigarh and Coimbatore are emerging as feasible low cost options
Parameter
Human
Resources
Cost Infrastructure
Support
Ecosystem
City
Perception
Overall Rating
Overall Location Assessment
Bangalore
Pune
Delhi/ NCR
HyderabadHyderabad
Chennai
Coimbatore
Chandigarh
Note: Location suitability ratings are given as per the mutual comparison of the 7 cities under consideration
FavorableNot Favorable

NCR stands as the most expensive location, while Hyderabad has the
cheapest facilities cost among Tier I cities
Facilities Cost* Differential across Cities, 2008
158
102 100
92
85
10 8
HyderabadBangalore ChennaiNCRPune Chandigarh Coimbatoreyg
Source: Cushman & Wakefield: Indian Office Market overview (2007), Zinnov Analysis
•Facilities cost includes lease deposit and monthly rental costs for central business areas in these cities
•Score of each city indicates a percentage difference between the rental rates of these cities, all cities are benchmarked against Pune which is at 100.
g

The talent pool in Pune and Hyderabad is not easily open to relocation
unless provided with extremely unique incentives
Talent pool migration preferences across locations
Bangalore Pune Hyderabad NCR Chennai
Destination
CitySource
City
Bangalore
P
City
Pune
Hyderabad
NCR
Chennai
Note:
• Willingness to migrate shows the perception, willingness and preferences of the talent pool for relocating from one city to another. Reasons for
Low Moderate High Very HighWillingness to Migrate
Source: Zinnov Interviews and Analysis
willingness to move could be compensation level, brand name, job profile, cost of living, ecosystem and friendliness of the city, domestic and
international connectivity, and the cultural background and origin.
• Only the top 5 product development cities are considered for this analysis.
• The above analysis is drawn specifically for product development talent pool installed across these 5 cities. It excludes expatriate talent
preferences.

Installed talent pool in Indian R&D centers is currently 146,000 of which
software product development engages about 52 per cent of the
professionalsprofessionals
Horizontal
Talent pool in R&D centers, 2008
Horizontal
Segments
Bangalore Pune Delhi/NCR Hyderabad Chennai Grand Total
SPD 48,773 8,851 6,562 8,636 3,889 76,711
Embedded
Systems
17,201 3,990 8,557 2,890 1,320 33,958
Engineering
Services
14,911 9,541 5,200 1,600 4,839 36,091
Grand Total 80,885 22,382 20,319 13,126 10,048 146,760
Note: This includes talent pool only for the R&D centers in these locations
Talent pool analysis has been done only for 5 major R&D suited locations.
Source: Zinnov Research, Zinnov Analysis

Fresh engineer base is currently 668 thousand—more than 60 per cent of
this talent is based in the South
Total Fresh Engineering Fresh Talent Pool
Delhi, NCR
Total Fresh Engineering
Graduates (2008)
668,000
73.5 K
Name of State
Comp Electronics IS
Total Engineers
Fresh Talent Pool
73.5 K 30K 30K 10.5K
AP
Maharashtra
147 K
93.5 K
147 K
31.7K 58.2K 17.1K
93.5 K
19.8K 26.9K 12.6K
AP
193.7 KKarnataka
100.2 K
Note:
193.7 K
38 7K 71 6K 25 1K
100.2 K
19.3K 29.8K 10.5K
Tamil Nadu
Note:
• Only AICTE approved engineering colleges are included for
the study.
• The size of the bubble indicates the amount of fresh talent
pool passing out of engineering colleges
• Fresh talent from other states: 60.1 K
Source: Zinnov Research, NAAC, AICTE
38.7K 71.6K 25.1K

Trends like growing leadership talent and increase in product ownership are
positioning India at the forefront of R&D offshoring capabilities
Strong LeadershipStrong Leadership
1
• Stable for atleast 5-6 years
• Capability to influence decision
makers at HQ
• Report to the executive
Strong LeadershipStrong Leadership
• Report to the executive
management team in the U.S.
Disciplined ProcessesDisciplined Processes
Catalyst for EmergingCatalyst for Emerging
MarketsMarkets
4 2
• Decide on the optimal
engagement and project
models
• Define metrics to measure
productivity and innovation
• Reinvest part of the savings to
build prototypes for emerging
markets
• Help your CEO understand the
MarketsMarkets
Key Success
F t productivity and innovation
• Structured training program for
engineers
• Improve recruitment efficiency
market in India
• Build strong product
management function
Factors
33
Product OwnershipProduct Ownership
• Strive to gain ownership on
product development
• Ability to analyze portfolio toy y p
gauge the benefits of product
transition to India
• Increase touch point with
customers

ZINNOV DISCLAIMER
All the information contained in this report is obtained through discussions with industry experts,
public and confidential information sources believed to be reliable. Zinnov makes no representations
or warranties regarding the errors, omissions or completeness of any information contained herein
ZINNOV DISCLAIMER
or warranties regarding the errors, omissions or completeness of any information contained herein
and shall have no liability for the same. The report is provided solely for informational purposes and
opinions must not be construed as advice recommendations or endorsements. The reader of the
report is advised to conduct an independent evaluation and form conclusions with respect to the
information provided.
No part of this report prepared by Zinnov can be reproduced either on paper or electronic media
without permission in writing from Zinnov or the India Brand Equity Foundation (IBEF). Request for
permission to reproduce any part of the report may be sent to ceo@ciionline.org.
Zinnov Contact
www.zinnov.com info@zinnov.com
69 "Prathiba Complex", 4th 'A'
Cross, Koramangala Ind.
Layout, 5th Block,
Koramangala
575 N. Pastoria Ave
Suite J
Sunnyvale
CA – 94085
21, Waterway Ave,
Suite 300
The Woodlands
TX – 77380Koramangala
Bangalore – 560095
Phone: +91-80-41127925/6
CA 94085
Phone: +1-408-716-8432
TX 77380
Phone: +1-281-362-2773

Strategic_Guide_Indian_R&D_Centers

Recommended

Recommended

More Related Content

What's hot

What's hot (11)

Similar to Strategic_Guide_Indian_R&D_Centers

Similar to Strategic_Guide_Indian_R&D_Centers (20)

Strategic_Guide_Indian_R&D_Centers