Costs up at India’s R&D centers
Zinnov Management Consulting reported that R&D operational costs are on course for a 9 percent year-on-year increase—13 percent in U.S. dollar terms—in 2011, following two years of stringent cost reductions.
Operational costs next year are expected to rise between 8 and 12 percent, the consultancy projects. Attrition among employees at the country’s 700 R&D centers has been as high as 20 percent this year, companies told Zinnov analysts, while salaries have increased between 10 and 15 percent.
“While these were some of the factors that led to an increase in operational costs, the mood at the R&D centers of global companies in India has not dampened, as they are looking at ramping up operations and continue to invest in value creation and innovation” in the country, said C.S. Chandramouli, director of Zinnov’s globalization advisory business.
Indeed, one finding of the study was that R&D centers are looking to hire experienced engineering talent. Staffing up with experienced veterans remains more cost-effective in India than in China, where operational costs are 25 percent higher. On average, tech professionals working at R&D centers in India have more than five and a half years of experience, a level that compares favorably with those in China, Eastern Europe and other R&D destinations.
The Indian R&D centers of global companies “offer significant cost arbitrage, even with the current cost inflation” in the country, said Zinnov director Praveen Bhadada. “The fact that these centers have helped parent companies save billions of dollars cumulatively in the last three years is testimony to that. “The focus is now shifting from costs to innovation, competency creation and leadership roles.”