The Internationalization of Corporate R&D

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THE INTERNATIONALIZATION OF CORPORATE R&Dgrowth in the Indian market, combined with the government’s decision to increase theforeign investment ownership cap in the sector, has generated considerable interestamong multinational companies locating production as well as R&D to India. Reregulation,competition, and mergers and acquisitions have created new opportunitiesand challenges for Indian and foreign companies in the sector.Multinational companies’ R&D (as well as Indian companies) in the IT and telecomsector became more significant in the 2000s. The IT/telecom R&D market in the countryis expected to show further growth in coming years. According to Frost andSullivan estimates, the IT R&D outsourcing market in India is expected to reach 9.1billion dollars in 2010 from 1.3 billion dollars in 2003 at a CAGR of 32 percent. TheR&D offshoring market for the telecom industry is estimated to grow from 0.7 billiondollars in 2003 to 4.1 billion dollars in 2010 at a CAGR of 28.7 percent (FICCI 2005).A large number of foreign companies have established in-house and outsourced software,IT hardware and telecommunication R&D-related operations in India (see Figure 11-2).Figure 11-2 R&D activities by multinational companies in India: software, IT hardware andtelecommunication sectors examples, as of 2006.Major In-House R&D OperationsAdobeHewlett-PackardAmerican Express IBM Global ServicesBaanIntel NovellCadence Design Systems MicrosoftCiscoMotorolaCitigroupOracleComputer Associates PhillipsCognizantSAPDeutsche Leasing SiemensEDSSun MicrosystemsEricssonSynopsysGeneral ElectricTexas InstrumentsGeneral MotorsYahoo!GoogleMajor Outsourcing of R&Dto Indian PartiesAlcatelCiscoComputer AssociatesEricssonFarmer’s InsuranceGeneral ElectricGeneral MotorsHome DepotIBMLucentMotorolaNokiaNortel NetworksXeroxNote: R&D and sector demarcations are broadly defined. List is intended to be illustrative.Source: Compiled based on TIFAC 2006, company reports, Times of India, Business Standard,Financial Times and interviews.Swedish-Related ICT CompaniesEricsson is a Swedish multinational company with long standing sales, production andmore recently R&D operations in India. Since the beginning of the 1900s, Ericsson has286
THE INTERNATIONALIZATION OF CORPORATE R&Dcontributed in almost every facet of telecommunications in India. As of 2005, Ericssonprovided 45 mobile networks to 12 major operators in India (Ericsson 2005).In the 2000s, Ericsson began developing Mobile Internet in the country. As a part of thisinitiative, an Ericsson Mobility World Centre has been set up in Gurgaon (in the NewDelhi area). This facility enables Ericsson to collaborate with application and solutiondevelopers, as well as network operators, to develop new applications and solutions forthe Indian market. Furthermore, Ericsson has set up a Systems Integration CompetenceCentre, also in Gurgaon, to create solutions for Indian operations. This center is expectedto grow to about 100 telecom professionals. In addition, a Customization Design Centerhas been set up with an initial manpower of 50 experts (Ericsson 2005).Ericsson has recently expanded its existing manufacturing facility in Kukas, Rajasthan,from AXE switching manufacturing to GSM Radio Base Stations (RBS). The GSM RBShas been adapted to Indian conditions and will help resolve challenges like higher operationand maintenance costs, severe climatic conditions, prolonged power cuts and voltagefluctuations. Local manufacturing will ensure easier handling of repair and returns, andflexible inventory management will reduce cost to operators (Ericsson 2006).In 2005 Ericsson announced its intention to set up its own R&D center in Chennai, aglobal services delivery center (GSDC) in Gurgaon and upgrade its GSM radio basestation manufacturing facility in Rajasthan. The company’s R&D center in Chennaiwill conduct research in cutting-edge technologies, while the GSDC in Gurgaon isfocusing on developing managed-services offerings in India. The GSDC includes thesystems integration competence center, the product customization center, the regionalnetwork-operating center and the mobility world center. The company also announcedplans to upgrade its RBS manufacturing facility at Kukas, Rajasthan, and commencemanufacturing of mobile switching centers (MSC) and base station controllers (BSC)(Business Standard 2005a).Ericsson has for several years partnered with the Indian IT company Wipro to outsourceR&D as an important element of Ericsson’s overall R&D strategy. Ericsson hassignificant R&D-related outsourcing arrangement with two other, major Indian ICTcompanies as well: TATA Consultancy Services (TSC) and Sasken. Outsourcingoperations to these three companies combined, accounted for approximately 1,000man-years as of 2005. Examples of other Swedish-related ICT companies with significantsoftware R&D operations in India include TietoEnator and Telelogic.11.4.3 Biotechnology-PharmaceuticalsThe biotechnology-pharmaceuticals sector comprises pharmaceuticals, bio-services,bio-agricultural, bio-industrial and bio-informatics. As of 2004, the biotech industryin India generated revenues amounting to 1,070 million dollars, with pharmaceuticals287
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