Global tech firms increase R&D presence in India

A large number of tech firms have R&D centres in the country, with Bengaluru alone having about 500 labs as of April, majority of them by multinational companies

India has become the choice location for global technology firms such Google, Microsoft and Uber to open development centres, as the country provides a unique blend of massive market opportunity along with a low-cost and highly scalable workforce.

There are a little over 900 foreign companies in hi-tech sectors such as software, automotive and industrial automation in India, according to management consulting firm Zinnov. The types of work these firms undertake include semi-conductor design, low-cost and reliable health care equipment, mapping products for low-bandwidth networks and automotive equipment that go into driverless cars.

"There is nothing new, nothing surprising. This (India) is the place for top-end manpower and has the ecosystem for technology R&D (research and development) for most of the global companies," says M N Vidyashankar, president of the India Electronics and Semiconductor Association (IESA). "Fortunately, the market opportunity is also huge in India for them to set their units here."

A large number of these firms have R&D centres in the country, with Bengaluru alone having about 500 labs as of April, majority of them by multinational companies (MNC).

These MNCs currently employ an estimated 300,000 people, growing at an average of nine-10 per cent every year. This growth comes at the cost of global workforce reductions, as it has often been seen that companies that lay off staff abroad simultaneously step up hiring in India.

"Cost continues to be a significant advantage for India compared to other global geographies, but the scale that India provides is still not seen anywhere apart from China. If you look at the kind of work being done here, companies are increasingly looking at the emerging local market flavours," said Anand Subramaniam, Engagement Lead and Program Manager at Zinnov.

While the first wave of R&D-oriented local centres came up to support development of products and solutions for global markets, the recent jump in local consumption has forced these companies to begin innovating for India also, using India as a testbed for new products and features.

San Francisco-based Uber, which competes with Ola in India's taxi aggregator market, has grown its headcount from 100 to 600 in the past one year. While the company is aggressively looking to expand its operations in India, it's also looking at its new development centre in Bengaluru to drive global innovation.

Building for India has already given birth to a few technological firsts for Uber. The company, which allowed payments solely through credit card, was forced to accept cash here, and the resulting solution that the company built was taken to markets such as Vietnam and Indonesia. Further, several safety features such as number masking have also been introduced in India.

"For us to dream of providing transportation which is as reliable as running water for everyone in India, we have reached a point where we have to set up an engineering centre here," said Thuan Pham, chief technology officer at Uber, at the inauguration of the company's development centre in Bengaluru in March. "If we all sit in the ivory tower in San Francisco, we cannot imagine how challenging the local conditions are."

It's often harder to innovate for India than anywhere else in the world, given that it has the right mix of low tech penetration and price sensitivity. Given this fact, more and more global companies are looking to build products out of India and are even collaborating with the emerging startup ecosystem for the same.

Earlier this year, Apple, the world's most valuable company that had shied away from India, instead focusing its energies in China, expanded its sales team in the country to sell its iPhones. At the same time, it also committed to opening two new development centres in the country to boost local innovation. The larger and more interesting of the two centres is the maps development centre coming up at Hyderabad that will employ 4,000 engineers and will become Apple's second largest development centre outside of its headquarters in the US.

Global rival Google, which has had a presence in India since October 2004 is estimated to employ around 7,000 people in the country, but does not reveal these figures officially. Another global technology powerhouse that's pushing out significant innovation out of India is e-commerce giant Amazon.

While engaged in a battle of market dominance with Flipkart, Amazon has been able to sale quickly by adapting its technology to work for India. CEO Jeff Bezos has countless times lauded his team in India for being instrumental in the success the company has seen here. Amazon too doesn't reveal how large its India employee base is.