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Is Cost attractiveness the most important aspect to consider while choosing a location for ER&D centre?
Is Cost attractiveness the most important aspect to consider while choosing a location for ER&D centre?

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This blog is third in the series of blogs on NASSCOM – KPMG Engineering R&D Global Location Analysis report

There are many parameters which are taken into consideration while choosing a particular location as the next engineering R&D centre for an enterprise. In the previous blog, we discussed whether having just the access to the relevant talent is enough for a company to go and set shop in another location. In this blog, we will explore cost as a parameter while choosing a location for an ER&D centre.  

Cost is among the most important factors or parameters that organisations consider while shortlisting locations to establish an ER&D centre. A location has to be cost competitive for it to be taken into consideration for setting up an ER&D centre. In the NASSCOM-KPMG Engineering R&D Global Location Analysis study, there are many sub-parameters considered too while delving deep into the cost parameter. A thorough and transparent view on the related and attached costs is necessary to understand the effects of the costs on future cashflow. These sub-parameters include –

  • Cost of labour for the profiles key to the engineering verticals in a particular location
  • Cost of operations including rentals, internet and broadband costs, electricity costs etc.
  • Tax incentives and related rates
  • Cost of living

 

Location 6

 

As per the analysis, India has emerged as a leader in the cost competitiveness parameter. India offers cost advantage across all the four sub-parameters.

While assessing the associated labour costs in the overall costs, it is imperative to assess the total labour cost to operating cost for various locations to get a better understanding of the locations providing the most cost advantage for both the components.

It is important that globally companies must realign their operational and geographical footprint as per the evolving pandemic situation. Companies must take into all the parameters into account and no single parameter in isolation should be given singular importance. No longer is India chosen because it just offers cost arbitrage for ER&D companies. There are other factors and parameters as well, where India scores high. The organisations must keep the long-term view of the company in sight and develop a comprehensive location strategy that underpins their blueprint to build, grow and sustain their ER&D centres.

 

Read more about this in the report “Engineering Research and Development – Global Location Analysis” from the links below –

NASSCOM Website – https://nasscom.in/knowledge-center/publications/engineering-research-and-development-global-location-analysis

NASSCOM Community - https://community.nasscom.in/communities/engineering-research-design/engineering-research-and-development-global-location


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Vandhna Babu
Principal Analyst - Research

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