At General Motors’ new design studio in Bangalore, a young designer tweaks the digital blueprint of a car interior. With a touch of the keyboard he flips the computer graphic of part of a GM car destined for Korea in 2010.
Nearby, the centre’s team of 70 engineers and industrial designers will soon start carving foam and clay models of GM cars, both miniature and life-size. Another room will house special equipment that projects 3D images of designs in progress.
This design studio in Bangalore, southern India’s technology hub, is one of 12 such GM centres around the world. Opened in November, the studio will specialise in the design of interiors for new GM cars destined for India and global markets.
The US automaker’s new design centre shakes the notion that India is a base merely for low-cost manufacturing. More multi-national companies are waking up to the idea of research and development in India and are doing more high-end work. Domestic Indian companies are themselves “moving up the value chain”.
In October, Suzuki Motors of Japan, majority owner of Indian carmaker Maruti Suzuki, pledged to invest a further $1.8bn in R&D and marketing in India on top of a previous commitment of $2bn. Carlos Ghosn, chief executive of Nissan and Renault, has cited the potential of India’s “frugal engineering” to develop quality lower-cost vehicles.
The trend of doing more advanced work in India extends beyond the automotive industry. Cisco, the world’s largest maker of networking equipment and routers, has opened its eastern hemisphere hub in Bangalore. The California-based company has earmarked $1.1bn of investment in India, with $750m devoted to research and development.
HCL Technologies, the Indian IT outsourcing company specialising in research and development, is signing up more big aerospace customers such as Boeing and EADS.
HCL has developed avionics such as landing gear, flight controls, power distributions systems, brake controls and other systems.
The company was heavily involved in developing Boeing’s 787 Dreamliner.
Nearly 1,500 engineers and developers are working on some 450 aerospace projects outsourced to HCL. The aerospace practice began in 1999 and the division’s revenues are growing at about 85 per cent year-on-year, says M Ashok Kumar, vice-president of business development at HCL.
The trend for India to take on more advanced work is expected to grow. Engineering services, which include work for the automotive, telecom and high-tech sectors, could expand to a $40bn market by 2020, according to a 2006 report from consultancy Booz Allen Hamilton, and Nasscom, India’s IT industry lobby group.
Highly-skilled engineers and scientists are paid a fraction of the salaries earned by counterparts in developed countries, and with its population of 1.1bn, India’s talent pool is deep. An estimated 220,000 engineers with four-year degrees graduated in 2005.
Although the aerospace work outsourced to HCL costs 20 to 30 per cent less than work done in developed countries, cost savings are not the only advantage of working in India, according to Mr Kumar, who sees HCL “jointly developing next-generation products” in the future. “As we go forward we will enter more strategic roles with global aerospace companies,” he predicts.
Darwin Allen, director of product communication with GM in Detroit, says of the new design centre in India: “Obviously you are aware of [cost savings], but the real motivation is to find people with expertise.”
At GM’s Technical Centre in Bangalore, which houses the new design centre, 1,000 employees are already involved in R&D.
To strengthen its focus on innovation in India, GM in November announced a $1m investment in a research tie-up with the prestigious Indian Institute of Technology (IIT) at Kharagpur in the eastern state of West Bengal.
The laboratory will focus on automotive electronics, controls and software. IIT is one of only a dozen institutions around the world involved in research collaborations with GM.
Multinational corporations such as Cisco and GM also see India as the eastern hemisphere hub for a 24-hour global operation in close proximity to the world’s biggest emerging markets. For GM, designs hatched in India could become cars sold from Asia to Latin America.
India is also taking on more R&D work beyond technology and engineering. Indian drugmakers such as Ranbaxy and Dr Reddy’s are known as manufacturers of cheap generic drugs but they are racing to develop original medicines with their own teams of scientists.
Indian drugmakers are also making more sophisticated generics. Evolvence, a Dubai-based private equity fund, in January invested $30m in Gland Pharmaceuticals of Hyderabad. Gland specialises in making pre-filled syringes with oncology and blood-clotting treatments at facilities approved by the US drug regulator.
These biological treatments are “high-end and high-margin”, says Hari Buggana, investment advisor to Evolvence.
“Indian firms have now moved up the value chain to produce branded generics, taking the lead in more sophisticated products like injectables,” says Ravi Penmetsa, managing director of Gland. “India has the potential to further boost its leading role in global generics production.”
Cisco invests in lavish campus to lure the local talent
At Cisco’s new $50m, 14-acre campus in Bangalore, the cricket pitch is not quite finished. Cranes and trucks rumble, and not far from the basketball courts, the aerobics and yoga rooms are still being completed.
Cisco Globalisation Centre East, as Cisco’s largest research and design centre outside the US is called, opened late last year in India’s southern technology hub. The sleek main building already houses 1,000 employees and the number will grow to 3,000 this year and 10,000 in 2011.
As part of its $1.1bn investment in India, Cisco will base one-fifth of its top executives in India over the next few years as it targets growing markets in the region.
About 20 executives have already re-located to Bangalore from the US, Europe and Singapore, including Wim Elfrink, Cisco’s “chief globalisation officer”, formerly based at Cisco’s headquarters in San Jose, California.
The amenities seem more fitting for a resort than for offices of the world’s largest maker of networking equipment and routers. But in India’s talent war, a sleek campus is critical to luring top engineers and technologists.
Although Cisco has low attrition rates of 8 to 9 per cent compared with double-digit rates at other companies, retaining employees is a challenge as opportunities in India grow and people hop from job to job.
Hence Cisco insists its efforts are not frivolous. The amenities “are a must”, says Syed Hoda, chief of staff at Cisco in Bangalore, as he shows a visitor a multi-cuisine cafeteria equipped with wall projectors for presentations, and a “break out” room furnished with funky modular chairs and shelves of cookie jars.
Cisco is betting on India as its eastern hemisphere hub, with Bangalore a short flight from the world’s leading emerging markets in Asia and the Middle East. “We want to replicate work here, not shift work,” says Varghese Thomas, Cisco spokesman in Bangalore. “We want to serve customers directly from here.” To that end, Cisco plans to spend more than $750m on research and development by 2010, as well as $100m on sales and marketing and $150m on Cisco Capital, an equipment leasing business.
It has already invested $100m in venture-capital funding for early-stage companies including online and mobile games maker Indiagames, telecommunications software company Bharti Telesoft, and media and entertainment company Nimbus Communications.
Cisco is diversifying into new applications for networks, such as smart and green buildings. It hopes to use India as a beachhead to take advantage of a massive construction boom in the region, particularly in the Middle East, where new buildings will require cutting-edge technology.
Retail is also a growth area for Cisco, which envisages the use of technology such as RFID (radio frequency identification) and is positioning itself for the expansion of regional retail markets.
Adjacent to the lobby in Cisco’s main building, construction workers put the finishing touches to some bright displays. This is a showroom for high-tech systems, as the Bangalore campus is among a handful of sites outside the US where clients can view these important demonstrations.
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