MNC R&D centers in India show high level of maturity

by CXOtoday News Desk    May 03, 2013

MNC RD centers

Traditionally, MNC R&D centers in India would take a long time to build scale and competency without much focus on the quality of the work. The trend is gradually changing as MNC R&D centers that have recently set up their operations in India are seen to be more value focused. A new study by research firm Zinnov revealed that at present, these centers emphasize on doing high quality work right from the start. The report that covered 220 product teams across 30 MNC R&D centers in India, noted that currently majority of teams assessed are in the middle of the maturity curve, with 10 per cent reaching the highest level of maturity.

The study also observed that product teams set up in the recent past are showing a higher maturity when compared with those that have been there for a while.

“Centers established in the last three to five years have brought products at higher maturity to India as they see India as a destination not only for “resource access” but also for “market access”. Others have built significant volume over time to gain a greater mindshare at the headquarters and hence drive higher value work from India. In essence, the potential for higher, profitable growth exists where companies have effectively globalized operations to leverage local R&D talent in India for global growth,” said Preeti Anand, Engagement Manager, Zinnov.

The study found that even though traditionally Bangalore has been the major R&D hub, cities like Pune exceeded Bangalore in percentage terms as far as maturity level of product teams are concerned, which Zinnov termed as ‘Product leadership stage’. According to Anand, a key reason for this is that the average age of product team inception in Pune is lower than Bangalore. This finding therefore reinforces that newer centers are bringing products at the right level of maturity from the start.

Centers established in the last 3-5 years have brought products at higher maturity to India as they see India as a destination not only for “resource access” but also for “market access”.
-Preeti Anand, Engagement Manager, Zinnov

According to Zinnov report, software firms currently account for the highest proportion of teams in the Product Leadership stage. While at the same time, the other emerging sector is healthcare that is also witnessing a significant growth momentum and is driving greater value of work to be delivered from India center by taking advantage of the local market access. Zinnov researchers believe that it is imperative to have strong proactive leaders with global influence to maintain India’s attractiveness as an R&D destination.

The study also noted that India centers with significant volume are able to drive higher value work from India. Moreover, senior-level engineering talent with in-depth product knowledge and strong domain expertise are key qualifiers for teams operating at higher maturity. The teams with a higher maturity have nearly 35 per cent of their headcount with more than 8 years of experience laying a strong foundation for enabling higher ownership.

According to Zinnov, customer proximity is another key maturity enabler. Product managers at higher maturity are responsible for managing outbound activities, apart from product definition and engineering activities. This results in close interaction with customers and contribution to the end-to-end product development value chain.

Benefits of higher maturity include increased innovation, reduced attrition and higher revenue growth. While teams at the highest maturity saw an average attrition rate of 8.8 per cent, the teams at the lowest maturity levels experienced 13.9 per cent attrition on an average. Teams with higher ownership are better at retaining its key talent. Revenue growth is a key benefit of higher maturity, with the study finding that companies incurring double digit revenue growth in the last 3 years have effectively globalized operations to leverage local R&D talent in India for global growth.

 

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