Over 200 publicly listed American companies have R&D budgets that exceed $100 million annually. Which companies allocate the highest proportion of that budget to engineering in China and India, specifically? And what drives their success with these global engineering initiatives?
To find out, we developed a measure and coined the term Global Engineering Intensity (GEI) as the ratio of the headcount of R&D staff in India plus China to a company’s current annual R&D expense. The count of R&D personnel for each company was obtained by queries on LinkedIn. While both measures are less than perfect, and we recognize that many companies use Eastern Europe and South American engineering sites, the GEI works well to demonstrate the diversity of industries—it isn’t just software and IT—with a significant portion of their R&D overseas. The top thirty companies are shown below.
We queried five of the top thirty companies to learn what factors have been most critical to the success of their global R&D initiatives (in a previous post we looked at the common myths about engineering talent in China and India). Six selected insights are presented here, tempered with our own experience in many years of consulting with global engineering initiatives.
They consider global engineering to be strategic. The quest to cut costs per engineer drives new entrants into using engineering and R&D resources from India and China. However, we found that the companies who are most successful with global engineering have vastly different motivations beyond cost reduction, albeit some of the same challenges as new entrants.
In fact, costs go up initially. Starting a global engineering operation “essentially doubles the expense for 6-12 months,” says former Informatica CTO, James Markarian. He goes on to say that global engineering initiatives “are like start-ups and can fail easily or deliver sub-par results and can quickly flame out. Pay the true cost and invest.” Jitendra Puri, Director of Verification IP R&D across four locations in India for electronic design automation vendor Synopsys Inc., says that making short term cost-reduction the sole focus can’t be a long term strategy: “One must find the right balance between talent and skill versus cost.” In our experience, this is a key success factor that separates the leaders in global engineering from the rest of the pack.
They believe in strong, empowered global leadership, at both HQ and at remote sites. Some companies have succeeded at leadership by transferring strong leaders from headquarters to offshore location; others have done equally well by hiring locally in India and China. Markarian states, “You need strong company managers to set up remote sites.” Puri adds, “The local teams need to be empowered more to make their own decisions. This will instill confidence and make them grow.”
Senior executive presence and travel across sites is an important part of integrating teams. Companies successful in global engineering ensure enough executive mindshare and budget for these activities.
They encourage global engineering through the right processes and tools. Location, time zone,
culture, and many other challenges need to be overcome for global engineering to be effective. CTO Darlene Solomon gives two examples of solutions at Agilent, “Key to making this happen is an investment in telepresence across all R&D sites and very standardized product development life cycle process.” Anurag Garg, head of Polycom’s India Innovation Center echoes this, “Video conferencing as a tool is a big enabler for better collaboration with remote teams.”
Time zone differences also affect work-life balance for employees on both sides. Successful companies provide local autonomy, they select managers whose personal situations permit working across time zones, and they allow for the extra grind that these employees may have to go through. While some of these points might seem obvious, we have seen a significant number of global engineering initiatives falter because the right tools and processes were not in placed or were not used sufficiently.
GEI leaders provide challenging assignments to their engineers regardless of location. Meenakshy Iyer, Vice President for Analytics Products Development at Oracle’s Financial Services Analytical Applications unit, underscores that talented engineers everywhere are quick to recognize companies that provide for career growth and those that assign challenging work, as opposed to those who treat their offshore team as a commodity. Her vision is that if you invest in grooming budding leaders at offshore locations, you can permanently solve your cost and capacity problems in product development.
While you can start an offshore location with non-critical responsibilities, unless responsibilities move upstream, you risk attrition. “Don’t send only ‘undesirable’ work like porting or testing offshore. If it is undesirable to your western team, it is probably undesirable to the offshore engineers as well. This model never lasts,” says Markarian.
They hire the top professionals at remote sites, and expect them to stand shoulder to shoulder with their staff elsewhere. In most global engineering initiatives, there are teething pains, and there is investment. But once established, high-GEI companies expect their emerging country locations to be measured by the same yardstick as western locations.
Iyer has managed the evolution of Indian talent for over two decades. “Over the years, the reality on the ground has changed—I see equal talent and creativity in young people educated in Indian institutions.” Solomon confides that Agilent “continues to assess R&D skills against predetermined world-class criteria.”
They engage well with local educational and research establishments. This helps them not just with hiring, but also in research collaborations. Engagement with local universities and government labs is another marker of success in our experience. Puri says that some colleges tailor their curriculum to meet the newer requirements of companies such as his own.
We believe that most large companies should take a close look at these examples and lessons for getting the most out of their global engineering initiatives—and to prepare themselves and their companies for the competitive onslaught of global innovation.