BANGALORE, February 11, 2016 /PRNewswire/ --
- People Cost, Which Comprises of the Employees' Payroll and Discretionary Cost Contributes 65% to the Total Operations Cost of R&D Centers
- Average Overall Operating Cost per Employee in INR Terms is Expected to Increase by 36% in the Next Three Years Owing to Significant Investments Made by R&D Centers to Deliver More Value From India
- Transfer Pricing Policy Changes and Open Litigations Continue to Plague MNC R&D Centers and has Resulted in a 5.2% Increase in the Regulatory Costs in INR Terms
Zinnov, a leading management consulting firm, today launched its much-awaited study on operations cost at MNC R&D centres in India, titled, 'Operations Cost Benchmarking 2015'. The study clearly indicates that MNC R&D centers continue to face cost inflation year-on-year, with the average overall operation cost per employee (Full Time) witnessing a 6.5% increase in INR terms compared to 2013-2014. The report, which is based on the actual cost data of 50+ MNC R&D centers in India, provides insights on cost landscape across industry verticals, locations, R&D intensity etc. Close to 20% of the MNC R&D talent in India was covered as a part of the study with representation from companies headquartered in the US, Europe, Asia-Pacific etc.
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The Zinnov study highlighted that contribution of people cost to the overall cost has increased owing to the increased focus of MNC R&D centers on employee retention and competency building initiatives. Talking about the study, Mr. Pari Natarajan, CEO, Zinnov, said, "This year we have seen that organizations are allocating a larger component of the overall cost towards people as compared to the last year. This can be attributed to increasing industry wide salaries, a growing focus on employee engagement and up-skilling of employees across the experience pyramid."
Taking a vertical specific approach, the study reveals that the Semiconductor vertical has a higher average overall cost per employee in INR terms compared to the Software vertical, with a marked differential of approximately 63 percent. A growing surge towards the adoption of cloud, rise in facility rentals and higher network bandwidth subscriptions has increased the average infrastructure cost per employee by 6.7 percent to INR 4.82 lakhs. More than 80% of the total infrastructure cost per employee is attributed towards facilities and IT/networking, it added. While optimization of infrastructure costs remains a top priority for these organizations, infrastructure is now also seen as a key enabler for enhancing organizational productivity.
Bringing in specifics on travel cost, the released Zinnov study said that increasing airfares and rise in global roles from India led to a 10.8% increase in the average travel cost per employee in INR terms. Further adding to this point,Mr. Anand Subramaniam, Engagement Lead and Program Manager, Zinnov said, "Gaining global stakeholder mind-share and owning end-to-end product development from India are driving small and large centers to take up more business and project related international travel."
In FY 2014-15, vendor related costs per employee witnessed an increase by 18.6 percent in INR terms, with close to 50 percent of all vendor costs accounted for by IT and product engineering service providers. Also, the Engineering Services vertical has the highest average vendor cost per employee due to the increasing capability of service providers in this space, the report reads.
And last but not the least, the Zinnov study strongly highlighted that the transfer pricing policy changes and open litigations continue to plague MNC R&D centers. One of the major worries for MNC R&D centers is the comparison to service providers during the transfer pricing assessment, which results in higher transfer pricing mark-ups. The regulatory cost have gone up by 5.2% in INR terms compared to last year.
Even though cost arbitrage will remain one of the top priorities for many centers in India, R&D centers are identifying strategic value propositions and charters that contribute towards the top-line or bottom-line for the business. Given this, in the next 3 years, the average overall cost per employee in INR terms is expected to increase by 36% owing to significant investments made by R&D centers to push boundaries and deliver significant value from India.
About Zinnov:
Founded in 2002, Zinnov is headquartered out of Bangalore with presence in Houston, Silicon Valley, and Gurgaon. In over a decade, Zinnov has built in-depth expertise in engineering and digital practice areas. We assist our clients in globalizing their operations and maximizing their footprint by:
- Effectively leveraging global resources for engineering, IT, digital and business ops for higher throughput - innovation, productivity, cost savings.
- Enabling companies to focus on new product development and core business processes by finding the best partners.
- Growing revenue for their products and services in India and other emerging markets.
With our team of experienced professionals, we serve clients in software, automotive, telecom & networking, semiconductor, consumer electronics, storage, healthcare, banking, financial services and retail verticals in US, Europe, Japan and India.
Media Contact:
Kinjal Chhetri Panwar
[email protected]
+91-8197140140
Zinnov Management Consulting
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