Indian R&D Compensation Report

This report is solely for the use of Zinnov client and Zinnov personnel. No part of it may be circulated, quoted, or reproduced for distribution outside the
client organization without prior written approval from Zinnov

Agenda

1 The Indian R&D Landscape

2 C&B Survey 2012

3 The Way Ahead

Post the financial downtime, R&D investments worldwide are starting to pick up
once again
Top 1,000 R&D Spenders Growth Trend, • After witnessing a decline in the 2009-
2007-11 (USD Billion) 10, global R&D spending has increased
600 significantly in 2010-11

582
• More than one-third of the global 1,000
550 R&D spenders already have centers in
549 India
538

500 511 • Companies outside of the US HQs are
starting to look at setting R&D centers in
India. About 28 per cent companies with
HQ in Japan, EU and APAC have a center
450
in India

400 • China continues to give tough
Jul 07 to Jul 08 to Jul 09 to Jul 10 to competition to India in many
Jun 08 Jun 09 Jun 10 Jun 11 benchmarks on various R&D desirability
parameters

Note:
Source: Zinnov analysis of top 1,000 R&D spenders in the world

MNC R&D landscape in India has rapidly grown in the last decade

Total Number of MNC R&D India Penetration of World’s Top
1,000 Centers in India 1,000 R&D Spenders
871
780 India
800
699

600 517
418
700
400
297
191
200

0 300
Before 01-02 03-04 05-06 07-08 09-11 Number of MNCs: 718
'00
Total Centers: 871

• The MNC R&D landscape in India is rapidly growing with a current base of 718 MNCs with their R&D centers
in India
• India currently boasts an installed R&D talent pool base of over 200,000 engineers growing at an average of
9% a year for the last 5 years
• R&D talent pool supply comprises of varied components like migrations from industries, software
professional returnees and the fresh engineering graduates

Note:
Source: Zinnov analysis of MNC R&D ecosystem in India

A multi-city R&D ecosystem is fast evolving in India

MNC R&D Centers Distribution in India by Fresh Talent Pool Availability by Key Locations in
Locations India

4% 13%
10%
35%
11% 43% 17%

13%
13%
10%
19% 12%

Bangalore Pune/ Mumbai Hyderabad Bangalore NCR Chennai
NCR Chennai Others Hyderabad Pune Others

• 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

• MNCs started expanding to tier-2 cities post 2005 as they offered advantages such as higher catchment area,
lower attrition, and cost arbitrage

Note:
Source: Zinnov analysis of MNC R&D ecosystem in India

Zinnov followed a multi-step methodology to collect and validate insights
around the compensation & benefits scenario of MNC R&D centers

Analysis &
Job Mapping Data Collection
Reporting

Questionnaire to collect Zinnov proprietary tool for
Job evaluation process to
quantitative information collating and analyzing data
determine the equivalence
pertaining to demographic gathered
among participating
details, payroll data, attrition &
organizations
hiring information etc.
Robust internal quality checks at
various levels and final analysis
Validate job matches with
Qualitative Data collected presented for both qualitative
comparator organization
through telephonic interview and quantitative data

Final Report is an in-depth study of compensation and benefits data, qualitative insights, attrition &
hiring trends, expected salary increase along with future outlook of the R&D landscape

An in-depth analysis of the current compensation structure of 82 MNC R&D
centers was conducted towards the scope of the engagement
Location Split of R&D Centres Headcount Split of R&D Centres Industry Split of R&D Centres
2%
3.7% 2%
6%
17.1%
17.1% 11.0% 8%
2%
14.6% 37.8%

13.4% 10%
17.1%
42.7% 69%
6.1% 19.5%

NCR Bangalore 0 to 250 250 to 500 Software product development
Chennai Hyderabad 500 to 1000 1000 to 2000 Embedded systems/ Semiconductor/ EDA
Pune Others Engineering Services
2000+ Software pdt development & Engg services
Software pdt development & Embedded systems
Engg Services & Embedded systems/Semiconductor
All 3 Segments
82 R&D Centres

Analyzed a sample of approximately 62,000 R&D employees across different geographic locations

• Latest compensation data ending January 2012 has been taken into consideration for the yearly analysis
• Outliers/ incumbents lacking data in terms of certain pay components have been excluded for the analysis

Note:
Source: Zinnov analysis of data collected during Jan to March 2012 towards the compensation & benefits survey 2012

2011 was marked a variety of changes on the compensation & benefits regime
in India
Key C&B Related Observations for 2011

a b c
Salary Increase in 2011 Strategic Areas Defined Geo Spread of R&D

A number of companies
Year 2011 saw salary increase of Locations other than Bangalore
increased focus on core strategy,
13.0% at an average are catching up in C&B
people and process

d e f
Attrition Under Control Increasing Experience Pool Functional Leverage

After a steep increase in in 2010, The overall experience pool The functional leverage of QA &
attrition was somewhat continues to increase for the product engineering continues to
controlled in 2011 R&D centers in India increase

g h
Focus on Variable Pay Employee Centric Benefits

Ever increasing employee
Continued focus on variable
centricity at the MNC R&D
incentives based on performance
centers in India

Note:

a Salary Increase in 2011

As the world economy recovered from the downtime, year 2011 witnessed
salary increments at an average of 13.0% at MNC R&D centers in India

Key Themes for 2011
Actual Salary Increments, CY11
Cautious Approach towards Salary
Increase
Average 13.0%
Focused Hiring to Balance the
90th Percentile 15.0% Pyramid

75th Percentile 14.3% Focused on Sustained Career Growth
for Employees
50th Percentile 12.0%
Increased Maturity of the Centers
25th Percentile 11.8%

10th Percentile 10.1% Multi City Strategy

0% 5% 10% 15% 20%

Note:


While salary calibrations did happen across levels, the direction is still not very
clear
Tech
Associate Engineering Associate QA QA Tech Support Technical Business
Engineer Lead QA Engineer Lead Manager Support (L1) Manager Architect Analyst
25%

20%

15%

10%

5%

0%

-5%

-10%

-15%
08 VS 09 09 VS 10 10 VS 11
-20%

Stretching Goals at Disparity Cost Technical & Business
Junior Level Management Optimization Focus

Note:


The difference between the HQ salary and the India salary tends to reduce as
one moves up the hierarchy
Comparison Between US and India on Total Cash , CY 2011
250,000
US India
196,181
200,000
152,000
1.3x
141,389
150,000
112,771 146,400
2.0x
100,000 2.1x
71,369
3.2x
50,000 74,674
2.8x 68,000

35,457
25,871
0
Software Senior Software Engineering Architect Engineering
Engineer Engineer manager Director

Note:

b Strategic Areas Defined

MNC R&D centers saw a revived focus on center level strategy, people centricity
and process efficiency

Talent development &
Focus on innovation and new Focus on quality and time to
retention
product development delivery

Focus on employee
Complete product/ business Focus on operational stability
engagement
ownership
Better collaboration with
Technical career path
Brand Visibility Global teams
definition
Top Priorities of R&D Centres

Note:

b Strategic Areas Defined

Effective matrix management, reporting structure for increasing efficiencies and
executive visits to increase transparency has been a prime focus
Central Reporting Structure at the R&D Centres

Global Stakeholder’s Visit to India

42% Global Reporting
• CEO/President – Typically once or twice a
duration of stay ranges from 2 to 3 days
58%
Local Reporting • CXOs/Senior VPs – Ranging from
once/twice a year to once a quarter;
duration of stay is 2 days to a week
• Directors/Sr. Mgrs – Ranges from once a
quarter to once in 2 months; Longer
duration to support product requirements

- Increased transparency
- Increased ownership
Pros - Communication gaps; More time to
- Cross leverage of expertise trickle down information
(Co-development)
- Lack of personal touch Cons
- Global Managers not aware of
Indian policies

Note:

c Geo Spread of R&D

Locations outside of Bangalore are also starting to evolve in terms of total cash
across levels
Median Total Cash (INR Lacs) Across Select Positions
(Max-Min)/Max
26% 18% 18% 29% 19% 23% 15%
30

25

20

15

10

5

0
Associate Engineering Engineering Solution Associate QA QA Lead QA Manager
Engineer Lead Manager Architect Engineer
Bangalore Pune Chennai NCR

Note:

d Attrition Under Control

Overall dip in attrition is a reflection of increased focus by companies on career
development, communication and competitive pay to retain talent
Yearly View of Attrition & Hiring
40.0% 32.7%
31.5%
19.7%
20.0% 21.0%
12.7% 17.4%
• Best in class companies were
0.0% able to keep their attrition rate
2009 2010 2011 below the industry average
Average Hiring for the Year Average Attrition for the Year
• Increased focus on career
Percentile Positioning of Attrition, CY11 enhancement by ensuring
increased ownership
90th %ile 24.5%
• Increased investment in new
75th %ile 19.4% products and improvement of
66th %ile 18.3% existing processes to focus on
technical career path, faster time
50th %ile 15.5% to market and quality
enhancements
33rd %ile 13.7%
25th %ile 12.8%
10th %ile 8.7%

0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0%

Note:


Overall dip in attrition is a reflection of increased focus by companies on career
development, communication and competitive pay to retain talent

12.0% Quarterly View of Attrition & Hiring
10.2%
10.0% 9.4%
8.8%
8.0% 7.4% 7.9%
8.0% 7.1%
6.0% 5.9%
6.0% 5.2%
4.1% 5.3% 5.7%
4.0% 4.6% 4.5% 4.6%
4.0% 5.6% 3.8%
4.0% 4.5%
2.0% 2.4% 2.3%

0.0%
Jan to Apr to Jun Jul to Sept Oct to Dec Jan to Apr to Jun Jul to Sept Oct to Dec Jan to Apr to Jun Jul to Sept Oct to Dec
Mar 2009 2009 2009 2009 Mar 2010 2010 2010 2010 Mar 2011 2011 2011 2011
Percentage of New Hires During the Month Percentage Terminations During the Month

• Companies generally do their man power planning (MPP) and budgeting at the start of the new financial year.
This leads to fresh hiring based on the annual MPP around these quarters

• Employees generally tend to look for better opportunities post their appraisal in March/ July (majority appraisal
cycles fall in this range) and companies are able to get the best talent either to back fill or for new positions

Note:


The aspiration of a typical R&D engineer has evolved over the last 2 decades

Factors Considered When Joining a Company

60.3%
57.5%

43.1%
40.6%
36.3%

24.7%

8.1% 6.3%

Job content Compensation Brand Image Workplace Future Career Designation Job security International
& Benefits Environment Opportunities assignments
Exposure to new
technologies,
frameworks and
forums

Note:

e Increasing Experience Pool

The overall experience level of the industry stands at about 5.7 years; Best in
class companies have been able to strengthen their experience pool further
Experience Level of R&D Resources Over
Employee Experience (No. of Years) for CY11 Past 3 Years
12 10.9 4% 4% 6%
10 17% 20% 18%
7.8
8
47% 40%
5.7 42%
6 5.2

4 3.2

2 32% 35% 34%

0
CY 09 CY 10 CY 11
Average 25th %ile 50th %ile 75th %ile 90th %ile
12+ Years 8 to 12 Years
4 to 8 Years 0 to 4 Years

• Over 25% of the talent pool has more than 8 years of experience compared to 6 years in CY2010

• Most companies have also struck a balance by hiring fresh talent at junior levels to optimize cost

• CY 2011 continued to witness an increased focus on hiring key technical as well as business skills

Note:


While Bangalore is maturing in terms of experienced talent pool availability,
other locations are fast picking up
Location Wise Experience Level of R&D Resources, CY11
100% 3%
6% 9% 5% 6% 6%
9%
90% 10%
14% 8%
18%
23% 24%
80% 25%
70%
42% 35%
60% 40%
42%
50%
37% 47%
40%
66%
30%
45% 48%
20% 41%
34%
29%
10% 23%

0% 5%

Overall Bangalore Hyderabad Pune NCR Chennai Others
Industry
12+ Years 8 to 12 Years 4 to 8 Years 0 to 4 Years

Note:


With less than 1% people in the age above 45 years, number of PhDs stand
close to 0.3% in the R&D industry
Age Analysis of the R&D Employees, Education Qualification of R&D Employees, CY11
CY11 0.3%
0.6% 0.1% 0.3% 0.1%
12.0% less than 25
18.7% Graduate
25 to 35
Masters
29.1%
35 to 45 Diploma

45 to 55 PhDs
70.2% Others*
68.6% greater than
55
* Includes 12th pass and
Certificate courses

• India has a rich talent pool of scientists and engineers thus, adding to the talent pool year on year; Over 45,000
engineers suitable for MNC R&D Centres graduate every year

• There has been increased trend towards encouraging employees to opt for technical as well as soft skills courses

• Few organizations consider PhD as one of the parameters during performance evaluation and very few have ties
with the universities to encourage the same

Note:


The R&D talent pool in India comprises of mostly young employees in the age
bracket of 25-35 years
Location Wise Age Analysis for CY11
0.3%
Others 7.1% 69.3% 23.4% 0.0%

Chennai 8.6% 66.7% 22.0% 2.7%
1.0%
NCR 7.6% 68.4% 22.9% 0.0%

0.5%
Pune 18.0% 71.1% 10.3% 0.0%
0.4%
Hyderabad 23.9% 67.9% 7.8% 0.0%
0.9%
Bangalore 14.4% 68.5% 16.2%
0.6%
Overall Industry 18.7% 68.6% 12.0% 0.1%

0% 20% 40% 60% 80% 100%

less than 25 25 to 35 35 to 45 45 to 55 greater than 55

Note:

f Functional Leverage

While volume increase is visible in the quality function, engineering functions
appear to be focusing on domain & experience

60.0%
Headcount Split by Functions (CY 2011)

52.8%
• Most of the product engineering work in India is
50.0% centered around product development/
sustenance, though the overall headcount for the
39.9% same has dipped in the last 3 years
40.0%
• As companies better utilize & optimize the
“relatively expensive” resources, this trend might
30.0% continue in the future

• Product management function has yet not
20.0% matured in India and only a handful of product
managers are currently available in India

10.0%
2.7%
0.4%
0.0%
Product Development/ Product Verification/ Technical Product Management
Sustenance Testing Support

Note:

f Functional Leverage

Pune and Chennai lead in terms of product management focus; Hyderabad has
more focus on quality function

0.3% 0.3% 0.8% 0.3% 2.6%
100% 1.3% 1.3%
9.5%
90% 15.6%
31.1%
80% 39.3%
46.8% 19.3%
70% 36.7%
60%

50%

40%
65.2% 61.4%
30% 59.5%
46.5%
20% 39.8%

10%

0%
Bangalore Pune Hyderabad NCR Chennai

Engineering Quality Technical Support Product Management

Note:

g Focus on Variable Pay

The focus on variable pay continues to increase across levels in the MNC R&D
ecosystem in India
Variable Pay as %age of Total Variable Pay as %age of Total
Cash (Across Levels) - CY2009 Cash (Across Levels) - CY2011
20% 20% 20%

16%
15%
15% 15%
12%
11%
12% 12%
10% 9% 10%
10%

7%
5% 6% 5%
5%

0% 0%
Junior Level Middle Level Senior Level Junior Level Middle Level Senior Level

Minimum Maximum Minimum Maximum
Note:

h Employee Centric Benefits

There has been an increased focus on employee benefits as a tool for employee
retention
Prevalence of Benefit Schemes
90%
82%
80%
72% 70%
70%
63%
60% 56% 57%

50%

40%

30%
19%
20%
13%
10%

0%
Joining Bonus Professional Development Plan Long Term Incentives Housing/Leased Accomodation

CY 2010 CY2011

Career Path Better Global Stakeholder Flexible Work
Definition/ Focus Communication Visits Environment

Note:

Agenda

1 The Changing R&D Landscape

2 C&B Survey 2012

3 The Way Ahead

While expected salary increments for 2012 are in the same range of the salary
increments in 2011..

Actual Salary Increments, CY11 Expected Salary Increase, CY12

Average 13.0% Average 12.6%

90th Percentile 15.0% 90th Percentile 15.3%





0% 5% 10% 15% 20% 0.0% 5.0% 10.0% 15.0% 20.0%

Note:

..MNC R&D centers in India are expected to continue to focus on various key
enablers for higher value generation
Adobe, Ericsson, Texas
Fresh Talent Acquisition Instruments
Talent Pyramid
Management
Talent Development and Retention Cisco, NetApp, BMC

Expat Programs Google, Microsoft
Senior
Leadership
Technical Events EMC, Cisco

Incubation Lab EMC, Yahoo, BMC
Market Impact
Product Management
Mcafee, Yahoo, Adobe

Startup Connect Microsoft, Honeywell

Ecosystem Vendor Connect Symantec, Cisco, Alcatel
Connect
Academia and Government relations
IBM, Intel, Alcatel

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This report is solely for the use of Zinnov client and Zinnov personnel. No part of it may be circulated, quoted, or reproduced for distribution outside the client 2
organization without prior written approval from Zinnov 9

Indian R&D Compensation Report

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