R&D Moves Offshore
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Research and development, once cherished as the crown jewels of competitive advantage at most companies, is increasingly becoming a global commodity.
The trend to hand R&D tasks to outsourcing partners has been gaining momentum in recent years. The movement cuts across a wide variety of industries, including IT, and encompasses companies both large and small. Customers are finding that tapping skilled researchers in all corners of the globe can save them from costly talent searches and help them get products to market faster.
The need for companies to get help in their R&D efforts was highlighted on June 14 when IBM announced it will be tuning its consulting operations to assist its customers in R&D projects, some of which IBM might carry out itself through its worldwide research capabilities. The initiative is being carried out by IBM's Global Consulting Services unit and complements the company's Technology Collaboration Solutions initiative, launched in March, in which IBM seeks to make its own R&D work available to customers.
"They want to teach clients how to fish," said Navi Radjou, an analyst with Forrester Research, in Cambridge, Mass. "There are some areas of R&D that are ripe for outsourcing, and IBM can do them. It's not body shopping, but brain shopping."
Radjou said companies, particularly in the United States, need R&D assistance because of a shrinking talent pool. In a report published in March, he reported that, since the mid-1990s, engineering and physics Ph.D.s in the United States have declined by 15 percent and 22 percent, respectively.
Indian outsourcer Wipro claims to be the world's largest provider of R&D work, handling $800 million annually, or 37 percent of the company's annual revenue, according to Ayan Mukerji, Wipro's senior vice president for product engineering solutions for North America, in Dallas.
Wipro typically works with the world's largest companies, but smaller companies need help as well. LeftHand Networks needed a helping hand when it was creating its SAN/iQ product, an iSCSI storage platform. The Boulder, Colo., company found it in Patni Computer Systems, to which LeftHand outsourced automated testing.
Patni, with headquarters in Cambridge, Mass., and development offices in Mumbai, India, developed routines and test scripts, performing the work at a Mumbai facility. Working with Patni enabled LeftHand to go from its 1999 startup to its first product rollout in 2001.
The relationship continues, as Patni helps LeftHand move the SAN/iQ software from one hardware platform to another by doing the integration work necessary so that the software can run on such platforms as the Hewlett-Packard ProLiant DL380 server. LeftHand now does between $1.5 million and $2 million of work each year with Patni, which has approximately 35 employees on the contract.
"Our business model is to take our core SAN/iQ technology and open up as many channels as possible," said Bill Chambers, CEO of LeftHand Networks.