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.

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