Where in the World is the Best Place to Offshore Your R&D: China or India? Computers Articles | June 14 Cheap Jordan 13 , 2008
The reality of business is that companies must do more with less to stay competitive and continually search out new ways to improve products and time-to-market to lead their markets. Top companies have long found it makes good business sense to outsource a business function ? from making parts to delivering payroll ? to wherever it can be done the best. With the Telecommunications Act of 1996 came the wave of fiber-optic cable and a new capability that truly enabled the IT departments of U.S. companies to plug into offshore outsourcing firms and take advantage of lower wages and cost efficiencies.
Many of these same companies have R&D departments developing embedded software and hardware and now the CTOs want to leverage offshore vendors to not only reap the same benefits of lower wages and expanded productivity, but bring better products to market sooner. Although the potential benefits are there, companies must consider two things before offshoring embedded R&D technology. First, the requirements of an R&D department that does embedded technology development for the marketplace and those of an IT department that serves employees are not the same. Second Cheap Jordan 12 , a country?s human capital may be good quality for IT projects, but may not be the best choice to meet the higher skill levels required for R&D embedded technology.
Basically, the technology offshoring choices boils down to two: China or India. China is known as ?the world?s factory? and produces $60 billion worth of consumer electronic goods a year. India, known as ?the offshore call center Cheap Jordan 11 ,? is the acknowledged leader in IT and business process outsourcing (BPO).1
Whether a CTO is searching for an offshore outsourcing vendor for a single project or a long-term partnership, the vendor?s country should be a significant part of the due diligence.
Engineering Talent Pool
The highly respected National Academies notes in an October, 2005 report that a company could potentially employ five chemists in China or 11 engineers in India for the cost of one chemist or engineer in the United States. Wages are lower offshore, there?s no question about that. Long Circle Cheap Jordan 10 , however, suggests that companies must look further and examine additional important criteria when searching for the best country to outsource embedded product research and development technology.
?Pay attention to attrition and wages
The number one reason most companies send work offshore is because wages are less. Experts recommend that engineering wages stay within the range of 20 to 50 percent lower than wages in the U.S. to make offshoring worthwhile. ?However an important factor to keep in mind is that the rules of supply and demand apply in offshoring and inevitably result in rising wages.
According to a report released in June, 2005 by management consulting company McKinsey and Company, India faces a shortage of middle managers due to the growth of India?s IT industry by approximately 20 percent annually over the last 10 years. Wages for IT project managers have increased by 23 percent annually over the last four years. 2
Attrition rates in India have been estimated at anywhere from 20 percent to 50 percent. Turnover is a problem and many firms are looking for ways to retain their workers in addition to increased wages. According to a Businessweek article in February Cheap Jordan 1 , 2005, India: Good Help Is Hard To Find, a prominent vendor is using creative ways to hire middle managers and to reduce attrition ? from finding homes for new hires to helping their children with school admissions.
Industry analysts acknowledge that India is the seasoned player in offshore IT technology and wages are rising, while China is newer to the offshoring industry and wages in China are lower.
Although both China and India have excellent universities and engineering programs, a very real concern for a company looking to offshore embedded systems R&D development is: ?Does this country have a large enough pool of R&D engineers, both new graduates and young engineers with seven years or less of experience? If not, supply and demand may eventually drive the costs up and possibly impact deadlines.
New graduates. The exact number of four-year engineering graduates each country produces yearly is open to debate.
The statistics cited in the first row of the chart below have been widely quoted in the media Cheap Jordan Womens Shoes , from Fortune Magazine to a speech by Senator Ted Kennedy. However according to the Wall Street Journal online, these figures are misleading and no one can track down a concrete and reliable source for where the numbers originated.
The statistics in the second row of the chart are from a study released in December Cheap Air Jordan Shoes , 2005 by Duke University (and also widely quoted in the media, including The Christian Science Monitor) that cites different numbers for the engineering graduates in each country.?
Regardless of the actual number, statistics show that China produces the most engineering graduates each year.
Experienced engineers. The offshore country?s workforce must have depth of experience as well. In a press release issued in February to review the industry?s performance during 2005, NASSCOM said that in India Cheap Jordan Shoes Online , IT service workers clearly dominate engineering R&D workers. According to NASSCOM, in 2005 there
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