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Zinnov: MNC R&D centres in India save $70B over the last 5 Years

Eric Ernest | Sept. 7, 2012
The Zinnov study found that Operating costs for MNC R&D Centres in India declined by 6% in US$ terms in FY12.

The Zinnov study found that Operating costs for MNC R&D Centres in India declined by 6% in US$ terms in FY12.

India, with it's 25 year old R&D ecosystem, is one of the most popular destinations worldwide for companies looking to set up their R&D centres, stated Praveen Bhadada, Director -- Market Expansion, Zinnov, when commenting about the findings from Zinnov's "Operational Costs Benchmarking Study 2012."

A key finding of the report was that "MNC R&D centres in India contributed to a net savings of over US$70 Bn for the headquarters in the last 5 years."

Zinnov arrived at this statistic by considering a scenario where the Indian ecosystem didn't exist; in other words, over the same time period, MNC's would have then had to spend $70 Billion extra to do the same work that they currently do in India at their headquarter regions.

It was mentioned that there are over 870 MNCs with their R&D centres in India, with the installed R&D talent pool base in India having a strength of more than 210,000 engineers, a figure that has been growing at an average of 9% a year for the last five years.

Bhadada pointed out that while almost 70% of the MNC R&D centres in India are headquartered out of North America, the number of R&D centres being set up by companies based out of Japan and APAC regions is on the rise.

While MNC R&D centres dealing with Software/Internet related verticals employ the largest number of professionals in the R&D spectrum, there was good growth in the number of R&D centres dealing with Telecom, Semiconductors, and Automotive segments, he added.

The per employee operations cost was highest for Semiconductor/Embedded companies, followed closely by Engineering Services, as these companies paid higher salaries when compared to the overall R&D industry trend owing to the associated task complexity and required skill set.

The Zinnov study, which provides an analysis of trends, investments and expenditure among MNC R&D organizations in India, reports that the overall operating cost for these centres declined by 6% in USD terms (10 percent in Euro terms), although there was a marginal 3% increase in terms of INR.

Factors which contributed to this reduced cost were the weakening of Rupee vis-à-vis USD and EUR; expansion into Tier 2 cities; focus on talent pyramid optimization - while companies continued to focus on building depth in technical expertise, the organization pyramid was balanced with aggressive hiring at the junior levels.

"For this year, we noticed that the Indian currency depreciation proved favorable as MNC R&D centres here were able to significantly optimize cost despite a net salary increment of 13% in the last quarter of FY12," Bhadada said.


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