Indian R&D market is on a Boom
Date: Friday , June 01, 2012
India is fast becoming a favored R&D hub of the world. More than one-third of the global 1,000 R&D spenders already have centers in India and many more will be here soon. About 718 Multi National Organizations (MNC) currently have R&D centers in India and the country currently boasts an installed R&D talent pool base of over 200,000 engineers growing at an average of 9 percent a year for the last five years. These results were put forth by a Zinnov as part of their study, 'Compensation & Benefits Survey 2012'.
According to the study, 2011 witnessed the strong revival of R&D investments worldwide. The significant growth in R&D activities across the globe signals the optimism in world economy which had earlier registered a drop in R&D investments in 2010. Globally the spending on R&D stood at $538 billion in 2009-10 period, while this in 2010-11 this grew at 8.2 percent to reach $582 billion. The study also says that till about mid 2000s, MNCs were concentrating at tier-1 cities in India primarily due to availability of rich talent, investment friendly policies, and high quality of life, but by 2005 this pattern started changing. Now MNCs have started expanding to tier-2 cities as they offered advantages such as higher catchment area, lower attrition, and cost arbitrage.
In 2011, MNC R&D centers in India witnessed an average salary increment of 13 percent. Increments varied between 10.1 percent and 13 percent during this period. When compared to the salary increment of the mid 2000’s this number might seem not at par, still post recession this increment is giving a new ray of hope to the field. The study suggested that while salary calibrations did happen across levels, the direction is still not very clear. Salary in all R&D positions varied from city to city in the country with NCR and Bangalore taking the lead in most positions while Pune and Chennai trailing them. It also presented a comparison between salaries offered in the U.S. and in India, and this comparison proved that the difference between the U.S. salary and the India salary tends to reduce as one moves up the hierarchy.
Another major finding is related to attrition in the industry. After a year of very high attrition the scenario seems to be changing and becoming more stable. "Overall dip in attrition is a reflection of increased focus by companies on career development, communication and competitive pay to retain talent," says the study. From a roaring 21 percent in 2010 the attrition rate has finally come down to 17 percent in 2011. Many of the best in class companies managed to keep a very close check on their attrition rate and keep it much lower than the industry average, with some even as low as 8.7 percent. Increased focus on career enhancement by ensuring increased ownership might have helped these companies in attaining this, says the study. While attrition went down, hiring went up and reached 32.7 percent in 2011, up from 31.5 percent in 2010.
A major finding in the study is that more and more employees are now looking at the content of the job, including technologies, frameworks and forums, rather than just the compensation package. 60.3 percent of participants in the study said that content is more important than compensation package.
Another disturbing finding is that about 70.2 percent of the total workforce in the Indian R&D centers is just graduates and the percent of PHD holders stands lower than .3 percent.
This is an issue that has been lingering in the industry for some time now and has been discussed at several occasions. R&D talent pool in India comprises of mostly young employees in the age bracket of 25-35 years. Most of the employees of the R&D centers are in Product Development or Sustenance, Product Verification or Testing areas; together these contribute almost 93 percent of the total workforce. Product management has the least number of employees, about .4 percent of the total workforce. "Product management function has yet not matured in India and only a handful of product managers are currently available in India," adds the study.
About 82 percent of the surveyed R&D centers are now offered joining bonus to its employees in 2011, up from the 56 percent that offered the same in 2010.
The study concluded by forecasting the expected salary increment for the year 2012. The rate remains more or less the same at an average of 12.6 percent. Overall, the present scenario in the industry looks great and the road ahead seems to have great potential. “MNC R&D centers in India are expected to continue to focus on various key enablers for higher value generation,” concludes the study.
By Hari Anil