R&D Globalization - R&D Service Provider Landscape in China
Sunnyvale, CA (PRWEB) March 20, 2009
Zinnov LLC, a leading management consulting firm, today launched an in-depth study on China's R&D Service Provider Landscape titled "R&D Globalization - R&D Service Provider Landscape in China". The study in totality brought to light the entire R&D service provider market in China and estimated the market to be USD 1.3 billion as opposed to a market of about USD 3.5 billion in India. It read that revenues related to R&D services for top 3 players in the China market is growing at a much faster rate than the industry average of 46.6%.
The China R&D offshore outsourcing market is dominated by Chinese service providers with relatively small presence of India and US based service providers. Though the overall R&D offshore outsourcing market is growing fast, most revenues come from low-end QA/ testing work.
"We have noticed that a majority of customers of China-based service providers are very uncertain about the capabilities of their partners owing to the nascent stage at which the market is in. However, at the same time, we do see an up-swing in the growth of US based companies trying to offshore their R&D related work to third party service providers in China", said Praveen Bhadada, Engagement Manager, Zinnov.
The report highlighted that the R&D offshore outsourcing market in China is highly fragmented with the top 10 service providers accounting for about 28 percent of the total market share. It also read that there are more than 10,000 large to small sized outsourcing service providers in China providing IT services/ ITeS / R&D services.
Divulging specifics on how Indian service providers have fared in the market, the report said that the Indian players have not been able to scale up their operations in China, in spite of having ambitious ramp up plans since their inception.
"MNCs who were looking at diversifying risks related to R&D Globalization, chose Chinese service providers as a risk mitigation strategy for the market. Additionally, reasons like cultural and language differences, coupled with issues around recruitment and retention of key employees, acted as deterrents to their growth. "Therefore today, most of the top Indian service providers in China do not offer a broad array of R&D services as opposed to their Chinese competitors and the focus is primarily on IT services", said Chandramouli, Director-Advisory Services, Zinnov.
The report additionally highlighted that the cumulative revenues for top 4 Indian service providers is about USD 65 million of which R&D services constitutes only about USD 7.7 million.
It read that the billing rates of service providers for R&D related work oscillates widely and primarily depends upon the kind of work, also adding that the rates for top 5 service providers are relatively higher owing to their experience, capabilities and quality of talent.
The strong ability of overcoming some of the most difficult challenges, coupled with favourable growth drivers have contributed towards the current state of the China offshore outsourcing market. Even today, communication issues with lack of scalability are primary reasons that are restraining its growth. However, low cost of operations along with the proximity to certain key markets in APAC region are some of the key drivers of growth.
The report also stated that in the near future, Chinese service providers would surely increase their focus on the US/ European markets by extending their sales operations in those geographies. The current high fragmentation would surely prompt the market, which is undoubtedly passing through a growth phase at the moment, to enter the integration phase observing increased M&A activities, as the top players would like to grow both organically and inorganically in a market which is expanding fast. Initiatives from Government and enterprises will also improve the talent capability which might act as a key driver in unleashing the market potential in the years to come.
Insights on R&D Talent Pool in China
- The total installed base of talent pool with Chinese service providers today is 39,000.
- About 75% of the total installed talent pool is junior level talent with less than 4 years of experience.
- China based service providers follow a unique organizational structure to overcome the language barrier and keep costs in check.
Snippets from the study can be found at Compatibility-Mode.pdf
About Zinnov LLC
Founded in 2002, Zinnov - meaning Zeal in Innovation - is a leading management consulting company providing services in the area of Offshore Advisory, Market Expansion and Human Capital Optimization to Fortune 1000 companies and other reputed SMB firms. Zinnov works collectively with clients to tackle prevailing organizational challenges by analyzing the changing dynamics, improving performance, and building institutional capability. The services delivered to its clients through advanced reasoning and analytical techniques, provides solutions that help in integrating organizational vision, business definition and processes.
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Phone Number: 408-716-8432