The presence of Research and Development (R&D) centers of MNCs in India has been a positive influence on the local industry ecosystem, reveals a study report. It fosters innovation, academic partnerships, entrepreneurial zeal while reversing brain drain.
In their report on MNC R&D centers in India titled, 'Impact of MNC R&D centres in India', Zinnov (management consultant firm) point outs that the diminishing cost arbitrage due to historic salary increments and overheads caused due to productivity differentials and inexperienced talent pool will be a cause of concern for the R&D wing this year. The report said the R&D section in India is still very nascent when compared with other Asian countries such as Japan, South Korea, Taiwan and Israel. Their local R & D ecosystem is very conducive for Multi National Companies (MNC) to enter and extract value in an accelerate fashion.
The report, in its outlook for the future, said that many of these R&D centers in India are now beginning to re-define their approach towards globalization, particularly in the next 12 months. In the drive to optimize costs, they would also explore opportunities in Tier II and Tier III cities in India to execute some non-core functions at these ultra low-cost destinations. As a result of these secondary locations i.e. 43 Tier II and Tier III regions are emerging as IT hubs in India, thereby reducing pressure on Tier I locations.
The study also reveals that R&D centers have been instrumental in triggering increased Foreign Direct Investment spends and in the development of secondary and tertiary locations, apart from providing direct or indirect employment to thousands of people. The centers have also been a crucial facilitator in checking the process of brain drain to western markets, while effecting reverse brain drain.
Talking about the report, Pari Natarajan, CEO, Zinnov said, "The cost pressures continue to exist, we foresee companies trying to execute more R&D work at the same or even lesser budgets as compared to last year. Companies would be forced to focus on new growth engines in the form of emerging markets (such as India and China) and newer technologies (such as SaaS/ Cloud). And this will fundamentally push all R&D centers to deliver higher value & higher productivity at lower costs." "The main reasons for brain drain some years back were the lack of attractive jobs and growth opportunities. MNC centers have played a major role in introducing the R&D departments and they are providing better opportunities, a reverse brain drain has kick started," Natarajan added.