MNC R&D centres mushroom in India

With so many foreign IT companies setting up R&D centres in India, Abhinav Singh believes that India is poised to become the R&D hub of the global IT industry

HP’s Indian research lab has been given the responsibility of doing research on emerging markets. It is expected to visualise a new technology and demonstrate it for use as a futuristic option, says Dr S Ramani

MNCs are looking at India in a big way, and are making huge investments to set up R&D centres in the country. The big names of the global IT industry—Oracle, IBM, SAP, etc—already have development centres in India, and are planning to further expand their existing facilities and infrastructure. A lot of them are carrying out a significant proportion of their R&D work in India, which contributes to their overall growth and success. Some of these companies have their largest development centres outside the US in India. The list includes Oracle, Philips, SAP and Texas Instruments (TI). Such has been the success of these centres that an increasing number of companies have realised India’s potential as an R&D resource, and are keen to set up their own centres here. Hardly surprising, because India has the largest pool of developers in the world, and its world-class technical institutes produce world-class talent.

Strategic importance

In recent years it has been observed that more and more foreign companies are delegating work of strategic importance to their development centres in India. This is further established by the fact that many of them have set up their largest R&D centres outside their country of origin in India. For instance, the Philips Innovation Campus (PIC) at Bangalore is the largest R&D centre for Philips outside Holland. PIC develops most of the software required for the company’s products; the centre works mainly on embedded software. Of course, Philips also carries out software-related work at its headquarters in Eindhoven in Holland, but as Dr Bob Hoekstra, CEO, PIC, says, "Almost every Philips product having software in it has a contribution from the Bangalore campus, which proves how much importance Philips gives to its Indian centre. The work delivered by Indian developers is just world-class."

Collaboration

Almost all the MNC R&D centres work in close collaboration with their counterparts across the globe. For example, Oracle’s India Development Centre (IDC), which is spread across twin locations in Hyderabad and Bangalore, is the largest development centre for Oracle outside the US. It carries on joint product development, and is involved in all of Oracle’s database products, applications, business intelligence products and application development tools. Oracle has now allocated some new activity areas to the centre. Says L Gopalakrishnan, director, platform technologies group at IDC, Oracle "We are now working on grid computing technology, and porting Oracle products to Linux."

Driving MNC growth

Many MNC development centres in India are driving the overall growth of their parent companies. TI’s R&D centre in Bangalore, which was set up in 1984, was one of the first to be set up by any foreign IT company in India. So far, TI has secured 225 US patents for work done at the centre. This has placed it much higher any TI development centre operating out of the US in terms of the significance of the work being carried out. The centre, which specialises in very large scale integration (VLSI) design and the embedded software domain, has developed some unique products which have won worldwide recognition for TI in the international market, and have been instrumental in driving its overall growth. The centre is credited with having fully developed at least 20 products for TI. These include Ankur, which is a chip in the digital signal processor (DSP) domain; Sangam, which is a bridge router for digital subscriber loop (DSL); and Zeno, which runs multimedia applications.

Excellent learning abilities and efficient project management skills are some of the reasons why MNCs would like to set up R&D centres in India, says Dr Uday Shukla

Product development

Many of the R&D centres are carrying out a significant portion of their product development in India. For example, Sun Micro-systems’ India Engineering Centre (IEC) carries out work on the Solaris OS and the Sun One Platform. IEC has also developed some of Sun’s products wholly in India, including the portal server, Web server, identity server and meta directory. In addition, IEC has contributed around 50 percent of the effort for the development of Sun’s App server. Says Vijay Anand, the centre’s managing director, "IEC is part of Sun’s core R&D centres spread across the world. Its software focus is now going to involve working on Sun’s N1 technology. Apart from this, we have small teams for process and design."

SAP Labs in Bangalore contributes nearly 10 percent of the company’s global product development. The lab has wholly produced some of SAP’s products meant for the global market, including the Channel Management Solution, which helps chip manufacturers negotiate prices with their dealers online, the Dealer Portal for the automotive industry, and mobile laptop solutions and oil and gas upstream solutions. Clas Neuman, joint managing director, SAP Labs India, says, "This is the largest single-location centre for SAP, besides the one at Walldorf in Germany. We have added new activities at our labs here in India; for example, we have detailed 10 people who are working on a new solution for value added tax (VAT). Besides, many of our people here are working on SAP’s Business Intelligence Solutions on a large scale."

For i2 Technologies, its Indian R&D centre spread across two locations in Mumbai and Bangalore is contributing immensely to its overall product development for the global market. The company has relocated many people from its US headquarters to its centre in India. The centre here is driving nearly 60 percent of the company’s global development delivery. Says Sankalp Saxena, managing director and senior vice president, i2 Technologies, "Although we have many other development centres across the world, our India development centre is the largest outside the US, and we have invested close to around $10 million in 2002 towards its growth." Besides developing many other products, the centre has fully developed a strategic sourcing solution for i2, and delivered nearly eight manufacturer-industry templates and retail solutions from India.

IBM’s Software Lab at Bangalore and Pune works on WebSphere, Û2, Lotus, Tivoli and Rational. The company has added new areas like middleware and business intelligence to its labs in India.

Looking ahead

HP Labs, Bangalore, is a unique research centre dedicated purely to research. HP has vested it with the responsibility of conducting research on futuristic technology for emerging markets with a focus on the Asian and African markets. The lab was set up early last year. It has a team of 20 specialists—engineers, linguists and research scholars who work on generating new ideas that can help the common man in emerging markets access technology at an affordable price. The lab works with all the different divisions of HP. Explains Dr S Ramani, the lab’s research director, "Other HP labs across the world have chosen a technology area and work upon it, but we have been vested with the responsibility of only doing research on emerging markets. We are expected to visualise a new technology and demonstrate it for use as a futuristic option."

Expansion spree

After evaluating the kind of work that is being delivered by their development centres in India, most MNCs are expanding them and increasing the level of crucial and strategic work being done at these centres. For instance, i2 technologies increased the headcount at its Indian development centre from 900 in 2001 to 1,000 in 2002. The company is now planning to add more people, and expects 90 percent of its global product development to be touched in some form by its India development centre in the near future.

Texas Instruments’ India team has developed some mission-critical chips which have won worldwide recognition, says Harish M

Similarly, Sun’s IEC in Bangalore is in the process of scaling up its operations. Anand says, "When the centre was set up in 1999 it had only 20 people, but we have scaled up to 500 people in a matter of four years, and have increased our operational space." The same goes for TI, which has expanded in space and is now spread across two different locations in Bangalore, with a present headcount of 900. Likewise, Oracle’s IDC is also planning to ramp up to 4,000 people from the present 2,700 people by the end of 2003.

The Philips campus has added a research group, which is working on patenting intellectual property and standards, and does research across different Philips products. This is the company’s only such research group outside Holland. The campus, which has around 895 people at present, is aiming to scale up to 1,000 shortly. Says Dr Hoekstra, "Initially, when we set up the innovation centre in India in 1996, we had apprehensions as to how it would fare. But the centre has exceeded our expectations and established its competence, prompting Philips to keep on increasing its strength in terms of manpower and the amount of work delegated to it. That is why it has grown from a headcount of just 10."

For SAP Labs it has been the same story, as after seeing the quality of work being delivered from India, not only is the centre shifting to a new, larger location by September 2003, but it is also in the process of increasing its headcount from 620 to 750. The centre has also added technology areas such as mobile device product development to its kitty. HP Labs has also seen its strength shoot up from two (when the centre came into being in early 2002) to 20 today. The lab is aiming to double its existing strength by 2004.

India’s R&D strengths

Highly-skilled manpower
India has one of the highest numbers of engineering graduates in the world, many from world-class institutions such as the IITs. Anand of Sun Microsystems says, "India has the largest base of Java-certified developers in the world, more pass out every year from different technical institutes, and we have around 500 of them working at our engineering centre in Bangalore."

Adds Harish M, TI’s business development manager, "The team at the TI centre in India has developed some mission-critical chips which have won worldwide recognition and have helped carry out all critical programmes for TI successfully." Many also feel that Indians grasp concepts quickly. Observes Dr Uday Shukla, director, India Software Lab, IBM Global Services, "Indians have a hunger to learn new technologies, along with an excellent learning ability and efficient project management skills. Seeing this potential, any MNC would like to set up its R&D centre in India."

World-class institutes
Some R&D centres are working in close association with prominent technical institutes in India such as the IITs. For instance, HP is leveraging the rich talent of IIT Chennai, and has opened a centre within the campus where students generate ideas for the lab. HP has a similar tie-up with the Indian Institute of Science in Bangalore. Recently, in a tie-up with IIIT Bangalore’s Hubli centre, IBM decided to set up a centre of excellence there.

Some of the MNCs decided to set up their R&D centres in India after seeing the world-class work being carried out at some of the technical institutes in the country, which again proves the capability of Indian technical manpower. SAP Labs in Bangalore has recruited a huge chunk of its manpower from IIIT Bangalore. Neuman points out, "Before we set up our centre, our team visited many research institutes in India; after seeing the standards here, the general satisfaction levels were very high, and we immediately approved the idea of establishing our centre here."

i2’s India development centre is the largest outside the US, and got investments of close to $10 million in 2002, says Sankalp Saxena

Cost-effectiveness
Cost-effectiveness continues to be a major driver, but not the key one, as most R&D centres in India leverage more on the skill-sets of their engineers. Still, it is true that Indian engineers and developers come at a much lower rate than their Western counterparts.

Now that most of the centres have proved their capabilities in terms of the quality of work they deliver, the cost factor has become instrumental in driving their expansion plans.

Proximity to markets
India is close to the fast-growing Asian markets, and many development centres here work to cater to these markets.

Dr Shukla of IBM says, "We at IBM Labs India help in meeting our customers’ needs through our domain knowledge. Customers are more satisfied when they find that the company has a development centre close by. The ‘Made In India’ brand has also become very prominent and credible these days, and customers get a value proposition when they get quality stuff from such centres."

Similarly, the prime motive behind the allocation of research work on emerging markets to HP Labs in India is that India itself is an emerging market, and its proximity to such markets would help researchers do efficient first-hand work.

Round-the-clock advantage
Besides other factors, the time difference between the West and India helps MNCs carry out round-the-clock development activities, which in turn helps these companies carry out round-the-clock operations, and thus contributes to their overall growth and productivity.

What does the future hold?
More MNCs will be tempted to set up their R&D centres in India, and thus benefit from the advantages that India has to offer. There are already many examples of MNC R&D centres doing quality work over here. The delegation of more mission-critical and significant work by such MNCs to their Indian centres reaffirms the faith. Even during the current tough global economic scenario, the expansion plans of these centres have not been put on hold by the MNC parent companies.

The Indian government has also been instrumental in helping MNCs set up such centres in India, and is helping them with tax exemptions and other incentives. While China is emerging as a major manufacturing hub for IT products, India is inching towards becoming a global R&D hub for the IT industry. Many hope that this trend will continue, and that there will be a regular supply of skilled manpower. This, coupled with the incentives which the Indian government is giving, can go a long way in branding India as the R&D hub of the IT world.

MNC products developed by R&D centres in India

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