operations cost benchmarking - january 2016
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OPERATIONS COST BENCHMARKING
January 2015
This report is solely for the use of Zinnov Client and Zinnov Personnel. No Part of it may be quoted, circulated or reproduced for distribution outside the client organization without prior written approval from Zinnov.
JANUARY 2016
The coverage of Zinnov’s “Operating Cost Benchmarking -2015” in the leading newspapers
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People Cost Travel Cost Vendor Cost Regulatory Cost
Zinnov’s Operations Cost Benchmarking study is in the 8th year and is meant exclusively for MNC R&D Centers in India to benchmark their operations costs across 5 key cost dimensions
o Payroll
o Benefits
o Facility
o Utilities
o IT/Networking
o Admin
o Miscellaneous
o International
o Domestic
o Legal
o Accounting & Payroll
o Service providers
o Audit
o Transfer Pricing
o Corporate Tax
o Litigation
o CSR
Infrastructure Cost
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The operations cost benchmarking study deep dives into different perspectives such as cost analysis across industry verticals, locations, R&D intensity etc.
Across Industry Verticals Across Locations Across Headcount
Software
Semiconductor
Engineering Services
Operations Cost Perspectives
Across R&D Intensity*
> 30%
15 to 30%
< 15%
Across Year of Establishment**
• 1990 - 1994• 1995 - 1999• 2000 - 2004• 2005 - 2009• 2010 Onwards
Across Years of Experience
• 13 Yrs+• 9 – 12 Yrs• 5 – 8 Yrs• 2 - 4 Yrs• 0 – 1 Yrs
1500+800-1499
400-799<400
NCR
Pune
BangaloreHyderabad
Chennai
4* R&D Intensity is a percentage of India R&D headcount against Global R&D headcount ** Year of Establishment refers to the year in which the India center was setup
35+ MNCs participated in the study of which ~ 60% are headquartered in the US and 67% belong to the Software vertical
Percentage distribution of companies by HQ Location
44%20%
16%
2%
US West Coast
US East Coast
Europe
Asia
Others
18%
Software
Percentage distribution of companies by industry vertical
Semiconductor
Engineering Services
67%
15%
18%
50+ MNC R&D CENTERS35+ MNCsParticipant Demographics
Percentage distribution of companies by R&D Intensity
< 15%
24%
15% to 30%
40%
30% and above
36%
Source: The OCB 2015 cost data is based on participation of 50+ MNC Centers in India* R&D Intensity is a percentage of India R&D headcount against Global R&D headcount
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₹$€
24.20 Lakhs
32,640
39,026
Average Overall Operations Cost
per FTE 2014-2015
6.5%
5.4%
19.5%
People Cost
Travel Cost Vendor Cost Regulatory Cost
Infrastructure Cost
% allocation of costs
Cost per FTE (in INR terms)
% change in costs (in INR terms YOY)
65% 18% 7% 4% 6%
15.80 Lakhs 4.82 Lakhs 1.33 Lakhs 0.93 Lakhs 1.07 Lakhs
6.7% 10.8% 18.6% 5.2%6.5%
Quantitative Insights
6% Change in Costs compared to FY 2013-14Source: The OCB 2015 cost data is based on participation of 50+ MNC Centers in India
MNC R&D centers continue to face cost inflation year on year, with the average overall operation cost per FTE witnessing a 6.5% increase in INR terms compared to 2013-2014
Contribution of people cost to the overall cost has increased owing to the increased focus of MNC R&D centers on employee retention and competency building initiatives
65% 18% 7% 4% 6%
63% 19% 8% 4% 6%
People Cost Infrastructure Cost Travel Cost Vendor Cost Regulatory Cost
2013-14
2014-15
Source: The OCB 2015 cost data is based on participation of 50+ MNC Centers in India
Overall Operations Cost Percentage Distribution across 5 Key Dimensions
• Organizations are allocating a larger component of the overall cost towards people as compared to the last year. This can be attributed to increasing industry wide salaries, a growing focus on employee engagement and up-skilling of employees across the experience pyramid.
• Even though the percentage cost allocation towards travel has remained range bound, travel costs have gone up, with organizations leveraging international travel and driving global roles out of Indian centers to gain ownership of global projects .
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