compensation & benefits study 2012

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

C&B Survey 2012 2

The Way Ahead 3

The Indian R&D Landscape 1

Post the financial downtime, R&D investments worldwide are starting to pick up once again

511

549 538

582

400

450

500

550

600

Jul 07 to Jun 08

Jul 08 to Jun 09

Jul 09 to Jun 10

Jul 10 to Jun 11

Top 1,000 R&D Spenders Growth Trend, 2007-11 (USD Billion)

• After witnessing a decline in the 2009-10, global R&D spending has increased significantly in 2010-11

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

• 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 in India

• China continues to give tough competition to India in many 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

191

297

517

699

780

871

0

200

400

600

800

1,000

Before '00

01-02 03-04 05-06 07-08 09-11

700 418

300

Number of MNCs: 718 Total Centers: 871

Total Number of MNC R&D Centers in India

India Penetration of World’s Top 1,000 R&D Spenders

• 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

India

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

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

43%

19%

13%

11%

10% 4%

MNC R&D Centers Distribution in India by Locations

Bangalore Pune/ Mumbai Hyderabad

NCR Chennai Others

13%

17%

13%

12% 10%

35%

Fresh Talent Pool Availability by Key Locations in India

Bangalore NCR Chennai

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

Agenda

C&B Survey 2012 2

The Way Ahead 3

The Indian R&D Landscape 1

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

Job evaluation process to determine the equivalence among participating organizations

Validate job matches with comparator organization

Questionnaire to collect quantitative information pertaining to demographic details, payroll data, attrition & hiring information etc.

Qualitative Data collected through telephonic interview

Zinnov proprietary tool for collating and analyzing data gathered

Robust internal quality checks at various levels and final analysis presented for both qualitative and quantitative data

Job Mapping Data Collection Analysis & Reporting

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

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

82 R&D Centres

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

17.1%

42.7%

6.1%

13.4%

17.1%

3.7%

Location Split of R&D Centres

NCR Bangalore Chennai Hyderabad Pune Others

37.8%

19.5%

17.1%

14.6%

11.0%

Headcount Split of R&D Centres

0 to 250 250 to 500

500 to 1000 1000 to 2000

2000+

69%

10%

2% 8%

2% 6%

2% Industry Split of R&D Centres

Software product development Embedded systems/ Semiconductor/ EDA Engineering Services Software pdt development & Engg services Software pdt development & Embedded systems Engg Services & Embedded systems/Semiconductor All 3 Segments

2011 was marked a variety of changes on the compensation & benefits regime in India

Salary Increase in 2011

Year 2011 saw salary increase of 13.0% at an average

Strategic Areas Defined

A number of companies increased focus on core strategy, people and process

Geo Spread of R&D

Locations other than Bangalore are catching up in C&B

Attrition Under Control

After a steep increase in in 2010, attrition was somewhat controlled in 2011

Increasing Experience Pool

The overall experience pool continues to increase for the R&D centers in India

Functional Leverage

The functional leverage of QA & product engineering continues to increase

a b c

d e f

Key C&B Related Observations for 2011

Focus on Variable Pay

Continued focus on variable incentives based on performance

Employee Centric Benefits

Ever increasing employee centricity at the MNC R&D centers in India

g h


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

a Salary Increase in 2011

10.1%

11.8%

12.0%

14.3%

15.0%

13.0%

0% 5% 10% 15% 20%

10th Percentile

25th Percentile

50th Percentile

75th Percentile

90th Percentile

Average

Actual Salary Increments, CY11


Cautious Approach towards Salary Increase

Focused Hiring to Balance the Pyramid

Focused on Sustained Career Growth for Employees

Increased Maturity of the Centers

Multi City Strategy

Key Themes for 2011

While salary calibrations did happen across levels, the direction is still not very clear

Stretching Goals at Junior Level

Disparity Management

Cost Optimization

Technical & Business Focus



-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

Associate Engineer

Engineering Lead

Associate QA Engineer

QA Lead

QA Manager

Tech Support (L1)

Tech Support Manager

Technical Architect

Business Analyst

08 VS 09 09 VS 10 10 VS 11

The difference between the HQ salary and the India salary tends to reduce as one moves up the hierarchy


71,369

112,771

141,389

152,000

196,181

25,871 35,457

68,000 74,674

146,400

0

50,000

100,000

150,000

200,000

250,000

Software Engineer

Senior Software Engineer

Engineering manager

Architect Engineering Director

US India

Comparison Between US and India on Total Cash , CY 2011

2.8x

3.2x

2.1x

2.0x

1.3x


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

Focus on innovation and new product development

Complete product/ business ownership

Brand Visibility

Talent development & retention

Focus on employee engagement

Technical career path definition

Focus on quality and time to delivery

Focus on operational stability

Better collaboration with Global teams

Top Priorities of R&D Centres


b Strategic Areas Defined

Effective matrix management, reporting structure for increasing efficiencies and executive visits to increase transparency has been a prime focus

Global Stakeholder’s Visit to India

• CEO/President – Typically once or twice a duration of stay ranges from 2 to 3 days

• 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

- Cross leverage of expertise (Co-development)

- Communication gaps; More time to trickle down information

- Lack of personal touch

- Global Managers not aware of Indian policies

Cons

Pros


b Strategic Areas Defined

58%

42%

Central Reporting Structure at the R&D Centres

Global Reporting

Local Reporting

Locations outside of Bangalore are also starting to evolve in terms of total cash across levels

c Geo Spread of R&D

Median Total Cash (INR Lacs) Across Select Positions


0

5

10

15

20

25

30

Associate Engineer

Engineering Lead

Engineering Manager

Solution Architect

Associate QA Engineer

QA Lead QA Manager

Bangalore Pune Chennai NCR

26%

(Max-Min)/Max

18% 18% 29% 19% 23% 15%

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

• Best in class companies were able to keep their attrition rate below the industry average

• Increased focus on career enhancement by ensuring increased ownership

• Increased investment in new products and improvement of existing processes to focus on technical career path, faster time to market and quality enhancements


d Attrition Under Control

8.7%

12.8%

13.7%

15.5%

18.3%

19.4%

24.5%

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

10th %ile

25th %ile

33rd %ile

50th %ile

66th %ile

75th %ile

90th %ile

Percentile Positioning of Attrition, CY11

19.7%

31.5% 32.7%

12.7% 21.0%

17.4%

0.0%

20.0%

40.0%

2009 2010 2011

Yearly View of Attrition & Hiring

Average Hiring for the Year Average Attrition for the Year

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

• 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



5.2% 6.0%

4.1%

5.9%

8.0%

10.2%

7.4% 7.9%

9.4% 8.8%

7.1%

4.0% 4.0%

2.4% 2.3%

4.5%

5.3% 5.7% 5.6%

4.6% 4.5% 4.6% 3.8%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

Jan to Mar 2009

Apr to Jun 2009

Jul to Sept 2009

Oct to Dec 2009

Jan to Mar 2010

Apr to Jun 2010

Jul to Sept 2010

Oct to Dec 2010

Jan to Mar 2011

Apr to Jun 2011

Jul to Sept 2011

Oct to Dec 2011

Quarterly View of Attrition & Hiring

Percentage of New Hires During the Month Percentage Terminations During the Month

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



60.3% 57.5%

43.1% 40.6%

36.3%

24.7%

8.1% 6.3%

Job content Compensation & Benefits

Brand Image Workplace Environment

Future Career Opportunities

Designation Job security International assignments

Factors Considered When Joining a Company

Exposure to new technologies,

frameworks and forums

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

• 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


e Increasing Experience Pool

5.7

3.2

5.2

7.8

10.9

0

2

4

6

8

10

12

Average 25th %ile 50th %ile 75th %ile 90th %ile

Employee Experience (No. of Years) for CY11

CY 09 CY 10 CY 11

32% 35% 34%

47% 40% 42%

17% 20% 18%

4% 4% 6%

12+ Years 8 to 12 Years

4 to 8 Years 0 to 4 Years

Experience Level of R&D Resources Over Past 3 Years

While Bangalore is maturing in terms of experienced talent pool availability, other locations are fast picking up



34% 29%

45% 41% 48%

5%

23%

42%

37%

42% 40%

35%

66%

47%

18%

25%

10% 14% 8%

23% 24%

6% 9% 3% 5% 9% 6% 6%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Overall Industry

Bangalore Hyderabad Pune NCR Chennai Others

Location Wise Experience Level of R&D Resources, CY11

12+ Years 8 to 12 Years 4 to 8 Years 0 to 4 Years

With less than 1% people in the age above 45 years, number of PhDs stand close to 0.3% in the R&D industry



• 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

* Includes 12th pass and Certificate courses

Education Qualification of R&D Employees, CY11

18.7%

68.6%

12.0%

0.6% 0.1%

Age Analysis of the R&D Employees, CY11

less than 25

25 to 35

35 to 45

45 to 55

greater than 55

70.2%

29.1%

0.3%

0.3%

0.1%

Graduate

Masters

Diploma

PhDs

Others*

The R&D talent pool in India comprises of mostly young employees in the age bracket of 25-35 years



18.7%

14.4%

23.9%

18.0%

7.6%

8.6%

7.1%

68.6%

68.5%

67.9%

71.1%

68.4%

66.7%

69.3%

12.0%

16.2%

7.8%

10.3%

22.9%

22.0%

23.4%

0.6%

0.9%

0.4%

0.5%

1.0%

2.7%

0.3%

0.1%

0.0%

0.0%

0.0%

0.0%

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

Overall Industry

Bangalore

Hyderabad

Pune

NCR

Chennai

Others

Location Wise Age Analysis for CY11

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

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

f Functional Leverage

• Most of the product engineering work in India is centered around product development/ sustenance, though the overall headcount for the same has dipped in the last 3 years

• As companies better utilize & optimize the “relatively expensive” resources, this trend might continue in the future

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


52.8%

39.9%

2.7% 0.4%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

Product Development/ Sustenance

Product Verification/ Testing

Technical Support

Product Management

Headcount Split by Functions (CY 2011)

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

f Functional Leverage


59.5% 46.5%

39.8%

65.2% 61.4%

39.3%

36.7% 46.8%

31.1%

19.3%

0.3%

9.5% 1.3% 2.6%

15.6%

0.3% 0.8% 0.3% 1.3%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Bangalore Pune Hyderabad NCR Chennai

Engineering Quality Technical Support Product Management

The focus on variable pay continues to increase across levels in the MNC R&D ecosystem in India

g Focus on Variable Pay

6% 7%

10%

9%

11%

15%

0%

5%

10%

15%

20%

Junior Level Middle Level Senior Level

Minimum Maximum

5%

12% 12%

12%

16%

20%

0%

5%

10%

15%

20%

Junior Level Middle Level Senior Level

Minimum Maximum

Variable Pay as %age of Total Cash (Across Levels) - CY2009

Variable Pay as %age of Total Cash (Across Levels) - CY2011


There has been an increased focus on employee benefits as a tool for employee retention

h Employee Centric Benefits

Career Path Definition/ Focus

Better Communication

Global Stakeholder Visits

Flexible Work Environment


56% 57%

63%

13%

82%

72% 70%

19%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

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

CY 2010 CY2011

Prevalence of Benefit Schemes

Agenda

C&B Survey 2012 2

The Way Ahead 3

The Changing R&D Landscape 1

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

10.1%

11.8%

12.0%

14.3%

15.0%

13.0%

0% 5% 10% 15% 20%

10th Percentile

25th Percentile

50th Percentile

75th Percentile

90th Percentile

Average

Actual Salary Increments, CY11


10.6%

11.6%

12.0%

13.5%

15.3%

12.6%

0.0% 5.0% 10.0% 15.0% 20.0%

10th Percentile

25th Percentile

50th Percentile

75th Percentile

90th Percentile

Average

Expected Salary Increase, CY12

..MNC R&D centers in India are expected to continue to focus on various key enablers for higher value generation

Fresh Talent Acquisition

Talent Development and Retention

Expat Programs

Technical Events

Incubation Lab

Product Management

Startup Connect

Adobe, Ericsson, Texas Instruments

Cisco, NetApp, BMC

Google, Microsoft

EMC, Cisco

EMC, Yahoo, BMC

Mcafee, Yahoo, Adobe

Microsoft, Honeywell

Vendor Connect

Talent Pyramid Management

Senior Leadership

Market Impact

Ecosystem Connect

Academia and Government relations

Symantec, Cisco, Alcatel

IBM, Intel, Alcatel

Zinnov Management Consulting

29

Zinnov Management Consulting

Thank You 69 "Prathiba Complex", 4th 'A' Cross, Koramangala Ind. Layout 5th Block, Koramangala Bangalore – 560095 Phone: +91-80-41127925/6 11, First Floor, Paras Downtown Center, Golf Course Road, Sector 53, Gurgaon – 122002 Phone: +91-124- 4028888 3701 Patrick Henry Dr. Building 7 Santa Clara CA – 95054 Phone: +1-408-716-8432 21, Waterway Ave, Suite 300 The Woodlands TX – 77380 Phone: +1-281-362-2773

[email protected]

www.zinnov.com @zinnov

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

mailto:[email protected]

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compensation & benefits study 2012

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