Pacific Bridge, Inc. - Asian HR eNewsletter

Volume 8, Number 4 (April 1, 2008)

MULTINATIONAL COMPANIES RETHINKING HR STRATEGIES IN INDIA

Dell India recently relocated one of its major research and development (R&D) units from Bangalore, India to Taiwan and Texas. Other technology companies, including Bose, Accelrys Software, and Apple Services, also announced plans to close R&D operations or reduce staff in India.

These moves come as no surprise to HR analysts, who estimate that the cost of operation for R&D centers in India for foreign companies has increased at around 12% annually over the past three years. The increases have been attributed to the rising value of the Indian rupee against the dollar, increases in domestic travel costs in India, and salary escalation. One survey estimated that the average annual cost per employee at large R&D centers in India is now between USD $45,000 and USD $60,000. This figure includes payroll, travel and training expenses.

On the other hand, many foreign companies recognize the undeniable strength of India’s talent pool and are finding ways to combat the increased costs while continuing to grow their operations in India. Methods for HR cost reduction include stronger performance appraisal systems designed to identify and address inefficiencies, reduced travel allowances for senior executives, and training programs to increase productivity of engineers and other research personnel. Cisco Systems, for example, which announced an additional $100 million venture investment in India last October, is in the process of opening more than 150 training academies throughout India. These learning centers will train more than 8,000 recent graduates over the next few years.

Many companies in India are also beginning to focus on hiring junior talent. Studies show that recent college graduates in India are paid only about half as much as those with two to three years of experience in the R&D field.



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