[kictanet] India Losing it's Attraction as Offshore R & D option?

Thu Feb 21 16:03:51 EAT 2008

Brian

You have raised a pertinent question. This is my take:

There has been heavy investment in the creation of Export Processing Zones
(EPZ) in Kenya, but the Government and the private sector should now
consider developing Technology Parks, which will serve as centres for
innovation and growth of the technology industry in Kenya. 

Future Technology Parks in Kenya must establish collaboration with other
technological centres around the world, the same way that Taiwan did with
Silicon Valley, resulting in the huge growth of technology industry in
Taiwan. Currently, Taiwanese patents now rank among the highest in the US
market.

The challenges facing Kenya's development as a technological hub today are
no different from those that countries like India and Thailand faced 20
years ago. These countries recognised the role of innovation as a key driver
of competitiveness in business, investment and new venture creation in their
economies. 

There has to be a resolve by the Kenya Government to create systems that
will nurture and encourage technological innovation and investment and push
the country towards a knowledge-based economy. The Ministry of Science and
Technology must place more emphasis on the management and shaping of
innovation and R&D in Kenya. 

The impressive achievements of the high-tech sector in Asian countries are
primarily as a result of national policies that have encouraged inward
investment in technology and innovation. 

Kenya needs to develop a National System of Innovation. This can be achieved
through increased linkages between the Government, business sector, the
research community and academic institutions in pursuit of innovative ways
of increasing Kenya's competitive advantage to make the country a dynamic
and exciting world-class hub for technology investment and R& D. 

Peres Were
Managing Director
CASCADE GLOBAL

-----Original Message-----
From: kictanet-bounces+pwere=cascadegl.com at lists.kictanet.or.ke
[mailto:kictanet-bounces+pwere=cascadegl.com at lists.kictanet.or.ke] On Behalf
Of brian
Sent: 21 February 2008 11:33
To: pwere at cascadegl.com
Cc: KICTAnet ICT Policy Discussions
Subject: [kictanet] India Losing it's Attraction as Offshore R & D option?

This should be v. interesting for us as we gear up for the "offshoring"
onslaught.....

Question is: What do we need to do to be ready to pitch for the kind of R&D
investments that India has benefited from?
- good bandwidth? (imminent)
- fairly priced labour force (done)
- R&D skills (errmmhh - anyone?)
- conducive investment policy (somewhat)
- stable political environment (oh dear...)
anything else?

Brian

ps. for Alex ;-)
http://ca.news.yahoo.com/s/afp/080220/technology/india_economy_technology_re
search_labour

----------------------------

Tue Feb 19, 10:45 PM

BANGALORE, India (AFP) - India used to be seen as the perfect offshore
research and development hub for global firms seeking to tap its low-cost
and supposedly vast engineering talent pool to devise products for world
markets.
ADVERTISEMENT

Companies including Microsoft, IBM, Intel, AMD, Google, Motorola, Yahoo!,
Cisco and Siemens have opened R and D centres in India, drawn by payroll
costs that were once a quarter of those in the US and Europe.

But the cost advantage is fading and engineers trained in basic research are
harder to find, reducing India's appeal, says Zinnov, a consultancy that
advises overseas firms on R and D issues.

"Some companies witnessed a 20 percent rise last year in the cost of running
their R and D operations in India," Zinnov chief executive Pari Natarajan
said in an interview.

"If this trend continues, the cost advantage of doing R and D in India
compared to the US will go away," he said, predicting a shakeout in the R
and D offshoring market.

India is home to 594 R and D facilities set up by overseas firms that
invested a combined 5.83 billion dollars, according to Zinnov.

Rising costs and a shortage of skilled workers have also hurt other
industries -- from software to retailing -- in an economy that has expanded
at an annual average of 8.6 percent over the past four years. But the R and
D offshoring market has received scant attention.

"Costs are going up all over, and we are also facing a shortage of shop
floor workers," said Anjun Roy, economist at the Federation of Indian
Chambers of Commerce and Industry.

"There is a need to improve skill sets in a lot of areas."

Like software makers, R and D centres whose expenses are incurred mainly in
rupees were hurt by a more than 12 percent rise last year in the value of
the Indian unit against the dollar.

Wages jumped about 15 percent as companies fought to hire and retain
hard-to-find engineers skilled in research.

India turns out more than half a million engineers every year, but
institutions do not train them in basic research, limiting the available
talent pool to no more than 100,000 people, said Natarajan.

The shortage may set back the ambitious expansion plans announced by
companies such as networking giant Cisco, which said in October that it
plans to triple its headcount in India to 10,000 in three years.

"It's going to be very difficult for companies which have very aggressive
hiring targets," Natarajan said. "It's almost impossible to hire unless you
compromise on the quality of talent."

Cisco, which plans to use India to develop products for customers in
emerging markets, has opened 170 academies across the country and is
training 8,600 students to overcome the talent crunch, human resources
executive Leo Scrivener said.

"We are aware that a large pool of technical specialists and business
solutions experts can't be readily hired from the market," Scrivener told
AFP.

Cisco has benefited from its R and D facility in India that has generated
110 US patents, with another 400 pending with the US Patents and Trademark
Office.

Hundreds of patents have been filed by other research facilities based in
the country. Half the work on an Intel wonder chip, a fingernail-sized
device unveiled last year that offers supercomputer performance, was done by
its India research centre.

Despite the problems facing R and D, Zinnov predicts that investment in
existing facilities by large global companies capable of riding out rising
costs, and with the infrastructure to train fresh graduates, will drive
India as an offshore R and D destination.

That will pump up the R and D market by an annual average of 23 percent
until 2012, even as per-employee cost in India increases by a yearly 13.3
percent.

Smaller facilities may have to shut shop or sell out while investment in new
R and D centres will likely dry up as part of a looming consolidation, said
Natarajan.

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