Wipro: India will increase its share of the R&D pie

Fuelled by a steady stream of engineers emerging from its schools, India will continue to increase its share of the research and development services market, according to the chairman of one of the country's largest outsourcing companies.

Azim Premji, chairman of Wipro, said at the Future in Review conference in Coronado, California on Monday: "The US will graduate more sports therapists this year than engineers. Engineering and medicine are the two most preferred professions in India, by far."

Software services still account for the largest percentage of Wipro's revenue, at about 60 per cent, Premji said. But the company has become the world's largest independent provider of R&D services for other companies, and it hopes the segment will account for 40 to 45 per cent of Wipro's revenue over the next few years, Premji said in a brief interview following his public discussion with Rafiq Dossani, a senior research scholar at Stanford University.

Research work enables Indian engineers to improve their skills, and it can be more profitable for India's services companies, Premji said. Over the last two years, India's government has improved the country's intellectual property (IP) laws to the point where foreign companies are much more comfortable turning over some of those crucial activities, he said.

This is a huge advantage for India over China, the other destination for companies looking to outsource work, Premji said. China has a better manufacturing base and national infrastructure but it has nowhere near the IP protection that is needed for higher-end work, he said.

Premji predicted that India is about to invest heavily in new roads, airports and ports that will help convince more companies to set up operations there. Right now, congestion is becoming a huge problem, as India's workers purchase more and more cars. India's outsourcing industry employs 1.1 million people directly and provides jobs to 3.5 million people overall through peripheral companies, he said. Wipro expects the industry to grow about 27 per cent during the next few years.

Tom Krazit writes for CNET News.com