At an estimated worth $11.8 billion, the IT R&D services market is a burgeoning field in India. The components of innovation and creativity have always been integral to the functioning of the IT sector. But since the time R&D services were first introduced in the country nearly decade ago, this sector has evolved significantly in its nature and functioning.
Pari Natrajan, CEO of Zinnov Management Consulting, who has closely studied these changes, said that during its nascence, the R&D sector in the country was involved only with coding and testing procedures. “Earlier, R&D service providers would have no knowledge on which component of a product they were working on,” he said.
The change
But gradually, R&D service providers came to be consulted on defining and outlining projects for a company. This change, to a large extent, can be attributed to the global economic downturn which took place 18 months ago. “In a scenario where companies were facing severe cutbacks, the recession created a need for R&D service providers to constantly innovate in order to make profits. Companies and their R&D teams collaborated more and created common goals for themselves,” Mr. Natrajan added.
Another reason why companies are investing more in their R&D services is because the revenue generated by them is not proportional to manpower.
Individual capabilities
Chaitanya Ramalingegowda, Director, Zinnov Management Consulting, explained: “The success of a R&D service provider does not depend on the number of people involved. Rather, it is based on the individual capabilities to innovate. This is in opposition to IT services, where more number of people translates to faster growth.”
Of all the R&D services that are outsourced from India, the development and testing segment accounts for 40 to 45 per cent, the conceptualisation and design segment accounts for 6 to 8 per cent, and the sustenance segment accounts for another 45 to 50 per cent. The telecom services and independent software vendors are responsible for nearly 50 per cent of the overall spend on R&D services. Presently, while India and China garner nearly 80 per cent of the global market in R&D services, the U.S. remains the lead R&D outsourcer.
