As MNC R&D centers in India invest for accelerated growth & value creation, operations costs rise by 9% in FY2011: Zinnov Study

Zinnov Management Consulting, a leading globalization advisory firm, today released the latest report in its much sought after series on operations cost benchmarking for MNC R&D centers in India. End Quote

While most preferred Tier 1 R&D locations in India witnessed an increase in the operations cost, the R&D ecosystem around Tier 2 cities in the country benefited from the change. Tier 2 locations have started to mature and these locations are catching up fast by offering up to 40-50% savings on cost compared to Tier 1 cities

(1888PressRelease) October 13, 2011 - Bangalore: The released study titled, 'Operations Cost Benchmarking (OCB) 2011', analyses the changing cost paradigm observed at MNC R&D centers in India as they invest for accelerated growth and value creation.

• Study reveals that operating cost in India is 25% lesser as compared to China
• MNC R&D Centers in India saved a cumulative of USD 44 billion for the parent organization for the last 3 years
• Average experience at MNC R&D centers is increasing and currently stands at about 5.7 years
• Attrition, one of the key challenges faced by R&D centers, went past 20% mark in FY 2011

The study states that the MNC R&D landscape in India is rapidly growing with a current base of over 700 MNCs with their R&D centers in India. The country today boasts of an installed R&D talent pool base of more than 200,000 engineers growing at an average of 9% a year for the last five years. Demand for engineering and embedded R&D work too seems to be increasing in India. However, FY 2011 also saw some significant changes in the way these centers operated.

Zinnov reveals in its OCB 2011 study that FY 2011 witnessed numerous changes in the operating cost dynamics for MNC R&D centers in India as net cost increased by 9% in INR terms and 13% in USD terms. This was after two years of declining input costs. Attrition management seemed to be the key challenge that had to be addressed by the top management as the attrition rates hovered around 20% in the last fiscal. The R&D centers also witnessed salary increments in the range of 10-15% at an average in FY 2011. While these were some of the key factors that led to increase in operations cost, the mood at MNC R&D centers in India has not dampened as they are looking at ramping up operations and continue to invest in value creation and innovation from India, says Zinnov.

Talking about some of the key findings, Chandramouli CS, Director, Zinnov Management Consulting said, "While most preferred Tier 1 R&D locations in India witnessed an increase in the operations cost, the R&D ecosystem around Tier 2 cities in the country benefited from the change. Tier 2 locations have started to mature and these locations are catching up fast by offering up to 40-50% savings on cost compared to Tier 1 cities".

The study highlights that centers have also started betting big on the county's promising talent pool; R&D centers witnessed the trend of recruiting experience pool for innovation and value creation. This clearly shows India is still rated as one of the most preferred R&D hotspot globally. The country is enjoying the label of being one of the cheapest R&D locations worldwide with highly talented engineers. In a direct comparison with China, operating costs in India are still 25% cheaper, finds Zinnov.

Says Praveen Bhadada, Director, Zinnov Management Consulting, "The R&D subsidiary centers in India offer significant cost arbitrage even with the current cost inflation. The fact that R&D centers in India have helped the parent organizations save a cumulative of USD 44 billion for the last 3 years is testimony to that. The focus is now shifting from cost to innovation, competency creation and leadership roles as the centers look to sustain and grow their operations in India. Centers are looking at further investments and innovation which will ensure that India retains its competitive advantage over other emerging countries. With an average of 5.7 years of experience at MNC R&D centers, India is better placed compared to Chinese, Eastern European and other R&D destinations"

Multi-city strategy, technical career path, compensation revision, focused hiring, focus on sustained career growth, attrition management are some the key components that R&D subsidiary centers will look to redefine going forward. Centers looking for growth, innovation and leadership in India might witness a cost inflation of 8-12% in FY 12 in INR terms, predicts Zinnov

About Zinnov Management Consulting

Founded in 2002, Zinnov - meaning Zeal in Innovation - is a leading management consulting company providing advisory services in the area of Global Sourcing, Emerging Markets Expansion and Human Capital Optimization to Fortune 1000 and reputed SMB companies. Zinnov works collectively with clients to tackle prevailing organizational challenges by analyzing the changing dynamics, improving performance, and building institutional capability. The services delivered to its clients through advanced reasoning and analytical techniques, provides solutions that help in integrating organizational vision, business definition and processes.

For further information, please contact:
Kinjal Chhetri Panwar
Senior Marketing Manager, Zinnov
Email: kinjal ( @ ) zinnov dot com
Phone No: +91 9466132313

http://www.zinnov.com

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