In fifteen years of offshoring, India has been aggressively expanding its higher-value services (proof points exist in business application innovations, product development, and BPO) and has developed a stable of world-class IT services vendors that can save foreign companies the trouble of setting up their own offshore centers. A large supply of qualified talent exist in areas outside IT, such as R&D, finance and accounting, call centers, and back-office administration.
Across every industry spectrum, there is potential for knowledge work to relocate to India. In orchestrating global innovation, we saw that names like HTC, Flextronics, Cellon, Quanta Computer, Premier Imaging, Wipro Technologies, and Compal Electronics, are fast emerging as hidden powers of the technology industry. They are the vanguard of the next step in outsourcing – of innovation itself. When Western corporations began selling their factories and farming out manufacturing in the ’80s and ’90s to boost efficiency and focus their energies, most insisted all the important research and development would remain in-house. With initiatives like the Chinese racing to ride the biotech wave coupled with a very high determination in China to leapfrog into hi-tech industries and dominate the global market for knowledge products, this is likely to change.
Contrary to popular belief, it is intellectual capital and university collaboration, not just lower costs, that primarily attract companies to locate R&D activities in locations away from their home country, so says the new study sponsored by the Ewing Marion Kauffman Foundation. The comprehensive study finds that emerging countries such as China and India will continue to be major beneficiaries of R&D expansion over the next three years as companies seek new market opportunities, access to top scientists and engineers, and collaborative research relationships with leading universities. Market growth potential, quality of R&D talent, collaboration with universities and IP protection are the key decision drivers. Surprisingly cost is never seen as a consideration in the decisions to locate these units.
Collaboration with universities was particularly prevalent as a factor for expanding to emerging countries, even though these countries provide lesser degrees of IP protection. Clearly while the trend toward R&D offshoring to Asia will continue despite concerns over IP protection, not to be overlooked is the fact that companies are keeping their most cutting-edge research in developed countries where IP protection is the strongest. Only 22 percent of the R&D effort in emerging countries is for new science. As Steve Lohr sees it, the globalization of work tends to start from the bottom up. The first jobs to be moved abroad are typically simple assembly tasks, followed by manufacturing, and, later, skilled work like computer programming.
At the end of this progression is the work by scientists and engineers in research and development laboratories. The globalization of research investment, industry executives and academics contend, need not harm the United States. In research, as in economics, they said, growth abroad does not mean stagnation at home – and typically the benefits outweigh the costs. It is universally more or less good that research and innovation are now fast becoming a truly global phenomenon.