SpicyIP Tidbit: Is the Sheen Wearing off?

If reports from the industry are any indication, the signs are that the appreciation of the Rupee combined with an acute shortage of trained professionals for basic research are taking its toll on India’s image as a Research and Development outsourcing hub. According to Mr.Pari Natarajan, Chief Executive of Zinnov, an R&D consultancy firm:

“Some companies witnessed a 20 percent rise last year in the cost of running their R&D operations in India. If this trend continues, the cost advantage of doing R&D in India compared with the US will go away”

He cites the example of Cisco to support his observation. Apparently, Cisco has benefited from its R&D facility in India that has generated 110 US patents, with another 400 pending with the USPTO. To overcome the talent crunch, it has opened 170 academies across the country to train 8600 students. The article from the Business Report further states that India churns out more than half a million engineers every year, but they are not adequately equipped for basic research, limiting the available talent pool to no more than 1,00,000 people. Other bigwigs such as Microsoft, IBM, Intel, AMD, Google, Motorola, Yahoo and Siemens too are not completely shielded from this scarcity. This observation read along with Mr. Basheer’s post on Indian software firms does not bode well for Indian industry.

Not only is this shortage pronounced in R&D, there is a huge gulf in the demand for and supply of quality engineers in the core sector for non-R&D jobs as well. Being an engineer, I can personally vouch for this fact that most engineers in top ranking institutions aim for a career in the services sector and in top-of-the-line consultancies like the Mckinsey group, Boston Consultancy group, Jones Lang LaSalle to name a few leaving very few good options for companies in the core sector. 

In addition to this, the pay packages from even the best names in the core sector on any given day cannot match those from the software and services sector for jobs of a similar grade nor are they considered glamorous. If companies with a global reputation have a human resource deficit, what about lesser-known outfits which form the backbone of the industry?

Down South (its Southern India, not South India), especially in cities like Coimbatore, Tirupur and Erode which boast of a Rs.10,000-Crore spare parts industry, attracting talented professionals has become a huge issue. It is a little known fact that every car which rolls out of the assembly lines of BMW, Volkswagen and other such auto giants in Europe, has spares made in the Coimbatore region. In addition, there are companies like Lakshmi Machine Works (LMW), ELGI Equipments Ltd, Pricol Industries which supply textile and auto components. 

These companies are left with limited talent pool to choose from during the placement seasons with not many students turning up even for the pre-placement talk. It should be pointed out that these companies have excellent reputations with their customer profiles boasting of the who’s-who of the manufacturing sector, domestic and global. In fact, ELGI Equipments is a market leader in compressed-air technologies investing a whopping 4% of its turnover in its Technology Development Division, which has a tie-up with the Center for positive Displacement of Compressors of City University, London. Ironically, the Coimbatore zone is among the best for engineering education not only in Tamil Nadu, but also in the country with some top-notch institutions that are older than the IITs. Particularly, the core engineering departments of some of the colleges in this region are counted among the finest in Asia. 

Yet, the cream of these students get absorbed in the IT and ITES sector and naturally, the companies have to make do with what they get. Fortunately for this region, their entrepreneurial spirit is comparable to that of the Gujaratis and the Hassidic Jews. To ensure that they do not miss out on proper talent, entrepeneurs in this region have jointly set up training institutes through their forum Coimbatore District Small Scale Industries Association (CODISSIA). Some of them run engineering institutions through trusts and the students finally get absorbed in these companies.

Such endeavours are the need of the hour for only if there is adequate talent to create intellectual property which is worth protecting; it makes sense to wax eloquent on protection of intellectual property. Sporadic efforts in certain pockets to give quick-fix solutions will not go a long way if we are looking at a sustained development for the next 15-20 yrs. Chinese efforts in this direction are worth learning from and much has been said and written on this. What is left is the most important part-comprehensive planning and clinical execution.

Hopefully, we shall have a post in a few days on the number of patents from small scale industries.

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