Demand for cost control will force R&D centers in India to put a check on salary escalations for the next couple of years: Zinnov Study

Online, March 10, 2010 (Newswire.com) - Santa Clara, California, March 10, 2010: - Zinnov LLC, a leading management consulting firm, today released its most sought after annual report on compensation titled, 'Compensation and Benefits Study 2010'. The study targeted at the MNC R&D centers in India brings to light how Compensation & Benefit is shaping up post-recession and what are the global changes and their impact on centers in India.

Setting stage, the study revealed that the R&D spend growth did go down significantly in the last 24 months wherein major verticals such as software/ internet, telecom/ networking, semiconductor and industrial automation witnessed a downward slip of growth by 5 to10 percent. However, while the economy is starting to show signs of upward movements, the recovery in the R&D growth has so far been only 'minimal'.

The report said that the diminishing cost arbitrage due to historic salary increments and overheads caused due to productivity differentials and inexperienced talent pool will be a cause of concern for the R&D fraternity this year. Centers in India would need to react to this by optimizing on the salary hikes for the current year and there on.

Talking about the report, Mr. Pari Natarajan, CEO, Zinnov LLC, said, "As the cost pressures continue to exist, we foresee companies trying to execute more R&D work at the same or even lesser budgets as compared to last year. Companies would be forced to focus on new growth engines in the form of emerging markets (such as India and China) and newer technologies (such as SaaS/ Cloud). This will fundamentally push all R&D centers to deliver higher value and higher productivity at lower costs".

"We also see that this demand for cost control will indeed force R&D centers in India to put a check on the salary escalations for the next couple of years", he added.

The study highlights that the industry will see an average salary increment between 6 to10 percent this year based on its growth at the India center and global performance of the business It adds that companies will be forced to offset low hikes by creating more responsibility areas, increasing ownerships and defining attractive career path to retain critical resources.

Zinnov does not expect the average attrition figures for the year to go beyond 9 percent. Hiring will continue to be slow and selective, highlighted the study. Campus hiring will be slow as deferral hiring from last year resulted in late joining for many freshers, it added.

Dwelling into the aspect of future outlook, it read that many of these R&D subsidiary centers in India will re-define their approach towards globalization over the next 12 months. In the drive to optimize costs, Zinnov expects Ultra Low Cost Locations (ULC) to emerge in the next few years.

Last but not the least, the study brought to light that service providers will also play an important role in the product development value chain. These providers would add significant value in cost optimization by undertaking non-core, non-complex functions, thereby allowing companies to save some funds for futuristic investments. At the same time, these third party providers would also take increased responsibility with mature/ sunset products in arrangements such as risk reward, revenue share and outcome-based pricing. Mid-sized companies are also now likely to benefit as the service providers augment their focus on the long tail of product companies in the drive to explore new growth engines for their respective growths.

Timed to the launch of this report Zinnov is hosting its annual global conference on Globalization titled "Confluence 2010". With the theme of 'Business Transformation Through Globalization', Confluence 2010 features as a first-of-its-kind event for the globalization community. The key theme of the conference is to network and learn best practices around global innovation, collaborative research and development, emerging market opportunity for products and shared services optimization.

Confluence 2010 will be held on March 17 and 18, 2010 at Santa Clara, CA. The event will stretch across two days of insightful panel discussions and keynote sessions addressing the theme, exploring patterns, challenges faced and best practices pertaining to globalization. The attendees of the conference will receive complimentary copies of the executive summary of the Compensation and Benefits Report.
Interested participants can find the detailed agenda http://confluence2010.com/ here. Individuals who are interested in receiving an invitation to "Confluence 2010", can apply for complimentary registration here.
For more details on the conference, visit http://confluence2010.com/