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Parameters to consider while choosing an ER&D location

Many enterprises grow and expand to newer locations. In the aftermath of the Covid pandemic, many companies want to diversify their risks and not put all their eggs in one basket. There can be multiple reasons to expand and explore other cities and countries.

Location 1

  1. Growth and revenue opportunities – By gaining access to newer geographies, companies can grow and increase their revenue opportunities, when they have exhausted all avenues in their home markets.
  1. Access to newer markets – With the access to newer regions and markets, companies are able to expand their operations, gaining new customers and providing new opportunities to introduce their products to a wider audience.
  1. Diversify markets – By expanding to newer locations, the companies are also able to diversify their risks and increase revenue when their home market is not profitable.
  1. Access to incentives – Many governments provide grants and subsidies to set up manufacturing centres in their countries. Companies can choose to take advantage of these opportunities and benefits.
  1. Larger talent pool – With expansion to different regions, one has access to a larger talent pool, which can be utilized to suit the local needs.
  1. Competitive advantage and exposure – Companies expand nationally and internationally to gain a competitive advantage over their competitors. When enterprises expand to newer territories, they often have the first-mover advantage that their competitors don’t, and hence are able to build their brand strongly before their competitors.
  1.  Cost savings – Businesses sometimes also lower their operational costs and are able to save money due to access to affordable talent and other costs.

 

For an ER&D organization, while choosing a location for expansion, there are many parameters which the companies use to make the selection. Every parameter is given weightage as per the company’s mandate, which it examines to arrive at a decision. Some of the parameters that can be considered are –

 

Location 2

 

  1. Availability and access to ER&D talent – One of the most important parameters for choosing a location include availability and accessibility to sustainable talent, which can be easily scalable. Presence of a large talent pool of engineers and R&D professionals in various verticals such as automotive, semiconductor, electrical and electronics, telecom and networking, software etc. is one of the key reasons for an ER&D company to choose a particular location. In this post pandemic world, when everyone is working remote, talent has become one of the biggest differentiators. Countries with relevant talent make it easier for the ER&D companies to enter and scale up quickly.
  1. Existence of ER&D ecosystem – Existing presence of ER&D centres, MNC centres, product engineering service providers, installed R&D talent pool, existence of engineering academia ecosystem, etc. helps a company in making a decision to consider a particular location. Existing ecosystem makes it easier for companies to enter without having the hassle of setting everything up.
  1. Cost of delivery – Cost of delivery and operations is another important parameter to consider. Affordable talent costs, and other costs such as real estate, cost of living, cost of operations, tax rates, cost of starting a business etc., is an important factor that is considered by companies before they move to a new location.
  1. Assessment of other risks such as operating environment risks in the form of quality of infrastructure, connectivity, quality of life, safety, security, and business environment risks such as geo-political stability, macro-economic and fiscal stability, legal and regulatory risks, exchange rate volatilities, ease of doing business etc. are among the other factors which the companies assess before choosing a particular location.

 

There are many other parameters as well that the companies assess and the above four are not an exhaustive list.

Choosing an external location is always a very important decision that a company makes. It takes considerable time, effort, and resources to set up in a new location. This is an important decision and requires careful consideration of all factors before a choice is made.

 

To read more on the topic, feel free to reach out to get the last NASSCOM Global Services Outsourcing Atlas.               

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