November 04, 2011

In big shift, all R& D roads leads to India

November 04, 2011

The Economic Times: Writankar Mukherjee

Early this year, when Samsung's software research base in India emerged as the company's largest in terms of manpower outside its home in Korea, it was a testament that the electronics giant was much more interested in India than just growing sales. Today, Samsung's two research centres in Bangalore and New Delhi are working on global projects.

The company employs 5,500 for research and plans to hire another 1,100 techies next year. And, it wants to grow its headcount at a similar pace year on year. "The immense intellectual power that India possesses makes it a perfect destination for carrying out research activities from the standpoint of technology and innovation," says Samsung's president and CEO (SW Asia) JS Shin.

The Samsung story is another example of India's growing prowess in the global R&D field. With India becoming a destination of choice due to its cost competitiveness, hiring by multinational companies is at an all-time high. There is a literal talent war for engineers and technical professionals.

At a time when companies across sectors are cautious on hiring and salary hikes, R&D centres are hiring talent at a premium and going in for salary hikes to retain them. So much so, that companies are disregarding the subsequent rise in operating cost. Hiring has touched its peak in FY11, when recruitment went up by 28% over last year. It is expected to grow by 15% this fiscal, according to a recent study by management consultancy Zinnov.

The study shows more than two lakh engineers are currently employed in Indian R&D centres, with the manpower base growing at an average of 9% annually. The industry has seen salary increments of around 15% in the previous fiscal, with attrition rates shooting up to 20%, it shows.

Operating cost of R&D centres in India has gone up by 9%, according to the study. Despite this, operating cost in India is still 25% lower than in China. MNC research centres in India saved a cumulative of $44 billion for their parent organisation over the past three years.

"The increase in operating cost, beginning last year, will not dampen the investment mood. MNCs are looking at ramping up operations and continue to invest in value creation and innovation in India," says Zinnov Management Consulting director Chandramouli CS.

Japanese corporations, for instance, are lining up major expansion plans for R&D in India. Car maker Maruti Suzuki has plans to increase its R&D manpower by over 20% to more than 1,300 in 2011-12 as it looks to become the research hub for its parent Suzuki. Ranbaxy, the Indian arm of Japanese drug major Daiichi Sankyo, too plans to grow its generic medicine research unit in India comprising 1,300 employees.

Japanese electronic giant, Panasonic, invested in its first R&D centre in India this year. The company is facing a talent scarcity and plans to work with Indian universities and companies to collaborate as well as to ease this problem. Panasonic plans to make its Indian research a hub for emerging markets.

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