The research and development outsourcing market for information technology in India is seen growing from $1.3 billion in 2003 to over $8 billion by 2010.

According to a study by Ireland-based leading market research resource, Research & Markets, India is now well on the road to becoming the world's favourite destination for outsourcing.

"But a low cost advantage does not spell sustainability. Moving away from call centres and other low-end services, firms are now beginning to exploit the intellectual calibre that is available in India," the study said.

• India and Outsourcing: Complete Coverage

"Evidence of high-end outsourcing is evident from the large number established R&D outsourcing centres in India."

The report looks at various aspects of R&D outsourcing industry in India, with special focus on the R&D outsourcing scenario in the IT, telecom, auto, research and pharmaceuticals sectors. Estimates for R&D outsourcing in India, with forecasts till 2007 for the IT, telecom and pharmaceutical sectors, are also provided.

The report examines the key drivers and inhibitors impacting the growth of R&D outsourcing, prospects for growth and key success factors. Success stories of some of the major companies like Texas Instruments, Microsoft, Cisco and GE, who have set up large R&D centres in India, are also provided.

The report is based on secondary data as well as extensive interviews with key people at the Indian R&D centres, to understand reasons for success/failure and other attributes of the successful companies.

The report will help companies setting up offshore R&D centres understand the key success factors; or what they need to do to make their offshoring efforts successful – from selection of key people, cultural issues, location, links with educational institutions, support from parent company, dos and don'ts.

"Outsourcing of services has considerably helped India's image as a business destination. The availability of English speaking, low-wage, skilled labour, are the most often cited reasons."

According to the report, the factors driving the increasing momentum of R&D off-shoring/outsourcing industry are: availability of highly skilled manpower; cost-effectiveness; proximity to fast-growing Asian markets; benefit of follow-the-sun schedules and information security solutions.

While the inhibitors are: inadequate infrastructure; security and intellectual property laws; quality of higher education and political risk.

In this study of successful R&D establishments, the success stories found were built on a well-defined set of success factors enumerated below: selection of key person to run the R&D operations; champions of the R&D set up; human resource management; strong quality systems; integration and communication; cultural issues; affiliation with educational institutions/ universities; clear roadmap and early successes.