Innovation starts to take over focus from cost cutting in Indian R & D centers

October 14, 2011

Even as global technology companies are growing their research and development teams in India, operational costs continue to rise, with this growing by 9 per cent during 2010-11. This amounts to a rise of 13 per cent in U.S. dollar terms, a study by Zinnov Management Consulting has found.

This rise in costs though, has come after two consecutive years of declining costs. Costs during 2011-12 are expected to rise between 8 - 12 per cent, it said.

Attrition among employees of the 700 R & D centers in the country was as much as 20 per cent, while salary increased by between 10-15 per cent during 2010-11. “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 India,” said C.S. Chandramouli, director – globalization advisory, Zinnov Management Consulting Pvt. Ltd.

A new fact also emerged from the study – that these centers have started hiring experienced talent for innovation and value creation, which is more attractive than China where operational costs are 25 per cent higher. The average number of years of experience in R & D centers in India is more than five-and-a-half years, which compares favorably with China, Eastern Europe and other R & D destinations.

“R & D centers of global companies offer significant cost arbitrage even with the current cost inflation (in India). The fact these centers have helped parent companies save billions of dollars cumulatively in the last 3 years is testimony to that. The focus is now shifting from costs to innovation, competency creation and leadership roles,” said Praveen Bhadada, director, Zinnov.



Related Article: India’s R & D drive slows


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