Bangalore home to highest average pay scale: Report
SOURCE: IBTimes
DATE: April 7th, 2008
MOHIT SOAPBOX:
This is similar to companies corporate growth model an unsustainable long term option. The study is focused around R&D and engineering companies but the percentage of growth is smaller in IT/ITES related sectors. I am still a bit cautious about R&D in India and if the Indian employees are ready to grow in an R&D organization.
ARTICLE
Bangalore continues to rule the roost in terms of highest pay scale, followed by Chennai, Pune and NCR, a recent study by management research and consultancy firm, Zinnov, has revealed.
According to the report titled, “Compensation and Benefit Study 2008,” the expected average increment in salary in 2008 is about 15 percent (one percent more than last year), with a few organizations planning to offer almost 30 percent hike to its top performers and rare or special skill holders.
Pune saw average salary hike of almost 15-20 percent since last year. The report suggests that this increase could be attributed to the growing demand for talent pool in the city due to a number of companies setting up its operations in Pune.
However, average salary for engineering positions across product development companies in India have come down by 3 percent. “About 40 percent of the average talent pool among the participating companies are with 0-4 years experience,” said Shammi T., director (human capital consulting), Zinnov, suggesting that the reason for the dip in salary is the increased hiring at junior levels.
According to Zinnov, the dip in average salary could indicate stabilization. However, it could also mean that organizations, which are increasingly offering cash-based incentives such as retention bonus, are also trying to keep the salary levels under control.
Indian software product development companies are also facing a dearth of product managers and technical architects, Zinnov said.
There are around 800 product managers and 2,500 technical architects in India though the demand for the same is three times more, it said, adding that the supply-demand gap has led to sudden hike in their salaries.
The average salaries of product managers rose by 25 to 30 percent, Shammi said.
The typical job profile of a product manager was to interact with clients, understand their needs and translate it into a product while the profile of a technical architect was to conceptualise the product and ensure solutions that would reach the masses, she explained, adding, “The demand for these two categories have gone up, with a lot of product development happening in India.”
Zinnov also suggested that Indian engineering product offshoring could look forward to a compounded annual growth rate (CAGR) of 23 percent by 2012.
Bangalore (312), Pune (96) and NCR (87) are home to more than half of the estimated 594 captive R&D centers located in India. Chennai (39) and Hyderabad (55) also have a large number of R&D centers.
However, increase in operating costs of captive R&D centers in India by more than 10 percent over the last one year has forced MNCs to restructure their human resource functions and policies that includes implementing measures to improve productivity of engineers (88 percent), hire more junior talent (63 percent), adopt stringent performance appraisal (38 percent) and reduce travel of executives.
While hike in salary (55-80 percent) has contributed the most to increase in operating costs of captive R&D centers, facility cost (15-20 percent), travel cost (2-12 percent) and communication cost (2-12 percent) are the other major factors.
“To reduce facility costs, companies are planning to sub-lease their vacant space and taking up space outside central business districts,” Economic Times cited Pari Natarajan, CEO, Zinnov, as saying.
“For companies who have set up research facilities in India for cost saving, the rise in operating cost has become a cause of concern. As a result, there is a focus on fresher since the salary of a fresh graduate is 50-60 percent less than someone with three years experience,” Natarajan was cited as saying.
Consequently, almost 67 percent of companies have seen a fall in the attrition rate in the last six months, he said.
“Operating cost escalation has become a serious constraint to the growth of R&D centers in India. We estimate the cost per employee to grow at CAGR of 14.3 percent over the period of next five years,” Natarajan said, adding that the cost rise has been primarily due to rise in salaries and the steep appreciation of the Indian rupee against the dollar.
Not surprisingly, companies like Dell Inc., Bose Corp. India Pvt. Ltd, Kana Software, Pervasive Software Technologies and Riya Inc have shut their R&D units in India and relocated elsewhere.
Operating costs and salary inflation will also stabilize after 2009, Zinnov said, as companies will increasingly tap tier-II cities to hire fresh talent and cut down on costs.
While small companies are expected to use third party services and temporary contractors to keep a check on costs, mid-sized firms, who followed the collaborative model, may move into own captive centers, it said.
Zinnov’s report also noted that while over the next 18 months, MNCs will concentrate on increasing their staff for captive R&D centers, yet, the rate at which the companies have established the captive R&D centers in India has slowed down significantly.
While 93 new centers were set up in 2004, only 24 centers were set up last year, the report said.
However, there is no need to panic. The biggest advantage of India is that the country has a vast pool of trained manpower. Moreover, special grants announced by the Indian government earlier this year to create knowledge workers would make India an enviable business or outsourcing destination.
In an earlier report, Boston Consulting Group had stated that India would have a surplus of around 47 million people in the working age group by 2020, while at the same time, rival China might be struggling with a deficit of 3 million people in the working age group.
Not surprisingly, companies like Cisco Systems Inc. and IBM Corp. are continuing to tap India’s talent pool and increase their investments in the country.
Zinnov’s research covered 390 software product development firms, 120 engaged in engineering services and 84 embedded service companies.
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