After manufacturing and business processes, R&D activities are the next wave in outsourcing.

The world has seen the globalization of services and manufacturing activities so far. But new trends are evolvingsending critical value chain activities such as R&D (Research and Development) is gaining ground across geographies specifically to India. India has a miniscule share in the outsourcing market of $800 bn; this indicates that there is a lot of scope for work to be outsourced to India from across sectors and service lines in the years to come. Western nations started outsourcing as strategic tool to cut costs.

Global companies are testing the waters in developing nations by setting up small facilities. They are not yet ready to outsource cutting-edge research activities. Outsourced R&D work right now is mostly restricted to improving the existing products. But, there are some companies that have slowly began sending critical research activities to development centers outside their home country after realizing the benefits.

In the pharma industry, rising costs in developed nations, expiring patents, low R&D costs in countries such as India and China and market competition are forcing MNCs to outsource R&D and manufacturing activities. Cost savings of up to 30-50% is possible in India. A pool of trained chemists, excellent track record of innovation and US Food and Drug Administration (US FDA) approved manufacturing facilities enable local players to offer significant benefits in the drug development process.