BENGALURU, June 2, 2015 /PRNewswire/ --
- Overall Cost per Full Time Employee (FTE) Increased by 4.5% From 2012-2013
- Companies are Undertaking Significant Investments on Infrastructure, People and Global Project Travel to Increase Capability and Centre Maturity While Leveraging Vendors for Non-core Activities
- In the Next one Year, the Average Overall Operations Cost per FTE in INR Terms is Expected to Increase by 6% Owing to Strategic Investments Made by R&D centers to Deliver More Value From India
- Building a Lean Organization Focused on Efficiency, Streamlined Processes and Cost Optimization Will be the Key Focus Area for CFOs of MNC R&D Centers in the Next Three Years
Zinnov, a leading Management Consulting firm, today released its findings from the annual Operations Cost Benchmarking (OCB) Study 2014, which assessed costs of MNC R&D Centers in India under five categories namely people, infrastructure, travel, vendor related and government & regulatory. In its 7th year, this study reflects the continued trend of how cost continues to play a key role across industry verticals, locations etc. Based on the recent findings, Zinnov said that India centers are moving up the maturity curve and delivering significant value to the headquarters, at almost the same cost point, making India more strategic.
(Logo: http://photos.prnewswire.com/prnh/20130213/594614 )
The average overall operations cost per FTE for 2013-2014 stood at INR 22.53 lakhs, which saw an increase of 4.49% over the previous year. The study brings to light that the average overall operations cost per FTE has increased YoY in INR terms but has decreased in USD and EUR terms. The marginal decrease in overall operations cost per FTE in USD and EUR terms can be attributed to the weakening of rupee in the last few years; however, it is expected to become stable with the current economic reforms underway.
Additionally, on comparing the overall operations cost per FTE across different industry verticals, it was noticed that the semiconductor vertical has an average overall operations cost per FTE of INR 32.07 lakhs, ~38% higher compared to the software and engineering services vertical. This can be attributed to higher salaries and significant infrastructure costs for the semiconductor vertical, when compared to other.
The released study also brought to light that people and infrastructure costs continue to be the major source of expenditure for MNC R&D Centers in India with ~80% of the average annual overall operations cost per FTE in 2013-2014 allocated towards the same. Organizations continue to invest on L&D (Learning & Development) programs such as cross-functional lateral movement, leadership development programs, technical career path etc. and reward high potential employees through patent and innovation awards. Organizations are also actively investing in go green projects, subscribing to cloud infrastructure and establishing virtual desktops to reduce overheads in the long run.
In 2013-2014, international travel emerged as a strategic tool adopted by organizations to build people capability and center maturity. MNC R&D centers in India, irrespective of size, are taking up business and project related travel to gain global stakeholder mind-share and own end-to-end product development from India. Mature R&D centers also incur travel costs by investing largely on grooming talent through global training and mentorship programs.
Average
% Distribution of Cost Per % Change in Costs
Overall Operations FTE in compared to
Costs per FTE INR 2012-2013
14.95
People Costs 63% Lakhs 6.53% (Increase)
4.73
Infrastructure Costs 19% Lakhs 7.57% (Increase)
1.19
Travel Costs 8% Lakhs 33.99% (Increase)
0.70
Vendor Costs 4% Lakhs 23.82% (Increase)
1.03
Government and Regulatory Costs 6% Lakhs 14.51% (Increase)
Additionally, in FY 2013-14, vendor related costs per FTE witnessed an increase by 24% in INR terms due to a rise in outsourcing of end-of-life products and non-core activities to service providers. Industrial automation, automotive, telecom & networking, software/Internet verticals are expected to witness increased vendor outsourcing activity in the near future. Vendor engagements under outcome-based pricing models have witnessed a significant increase over the last few years, but there is still a long road ahead on this front.
Commenting on the Operations Cost Benchmarking study, Nitika Goel, Director, Zinnov, said, "While cost continues to be a key driver for R&D globalization, the India centers are investing rapidly in new technologies such as cloud, mobility and analytics to be able to deliver value on par with all global centers."
Based on this study, organizations are using different models and processes to drive global and local innovation from the India center. This futuristic vision implies a higher cost point for MNC R&D centers in India and some of the initiatives that will drive costs up while at the same time will exponentially increase value include: providing hot skill bonuses, establishing digital knowledge management systems, investing on incubators, labs etc. And last but not the least, the Zinnov report highlighted that in the next one year, the annual average overall operations cost per FTE is expected to increase by 6% owing to these strategic investments.
About Zinnov
Zinnov provides consulting services for the establishment and management of offshore captive centers for Engineering & IT, BPO, and knowledge process based services. Zinnov offers offshore advisory services; and assistance with conducting market analysis, exploratory research for expansion and business analytics. Zinnov also provides business consulting and support services, which include customized consulting engagements, operational dashboards, industry trends and best practices monitoring, and policies in the areas of technology & IT services, business and corporate services, growth strategies, expansion initiatives, branding, and process improvements.
Zinnov serves clients in Software, Automotive, Telecom& Networking, Semiconductor, Consumer Electronics, Storage, Healthcare, Banking, Financial Services & Retail Verticals in US, Europe, Japan & India. Zinnov was founded in 2002 and is head quartered out of Bangalore. The company has locations in Houston, Silicon Valley, Bangalore & Gurgaon.
For more info visit: www.zinnov.com
Media Contact:
Kinjal Chhetri Panwar,
[email protected],
+91-8197140140,
Zinnov Management Consulting
Share this article