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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 study noted that Tier-II cities are becoming an attractive option for MNC's to set up their R&D centres, with approximately 30% lower costs than other Tier-I cities like Bangalore - the commercial real estate prices are also 15%-20% lower on average in Tier-II cities such as Jaipur, Chandigarh, Ahmedabad, Vadodara, Nagpur, Trivandrum and Coimbatore.

Interestingly it was pointed out that attrition was much less of a problem in Tier-II cities, when compared to Tier-I cities, due to factors such as a lack of competition and hesitation to migrate on part of the employees.

There was an increased focus on contract resource hiring in FY2012, with contract resources accounting for 9% of the total MNC R&D population.

Companies were increasingly hiring employees on a contractual basis in order to optimize on people cost, bring in flexibility and stability in the system and quickly respond to changing economic and business conditions - this trend is expected to continue, although it does come with its own set of challenges.

Another key finding was that while STPI (Software Technology Parks of India) scheme withdrawal has impacted 80% of the analyzed sample of R&D centres; not too many of the respondent's considered moving to SEZ (Special economic zone) as a viable alternative.

Bhadada stated that while India is the preferred destination for MNC R&D centres, other countries which provide attractive alternatives are the Philippines, Malaysia and Ukraine.

Talking about how India was performing vis-à-vis China, the Zinnov official said that while China has more R&D centres numbers (~ 1300) than India, the latter still leads in terms of the number of professionals employed at such centres.

Whereas companies set up R&D centres in China with a view to tap into the lucrative Chinese market, firms that set up their R&D centres in India are doing so to access the global market, he added.

In conclusion, Bahdada reiterated that Zinnov is "confident that India will continue to maintain its competitive advantage over other emerging markets for a long time."

 

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