Captive IT R&D costs decline on slowdown, falling Re

According to Zinnov, the cost of running an R&D unit or a product engineering captive in India is expected to decline further by 10-12 percent in the next 12 months

 

The slowdown in the global economy, along with the depreciating rupee against the US dollar, have seen a reduction in the operational costs of captive IT R&D centres in India, according to a study.

 

The cost of running an R&D unit or a product engineering captive in India was down by about 6 percent in 2008 in absolute dollar terms and it is expected to decline further by another 10-12 percent in the next 12 months, according to the study 'Operations Cost Benchmarking for Product Engineering Captives in India' by Zinnov, a management consulting firm.

 

The report said that owing to the global economic meltdown and strict budgetary constraints, R&D centres in India were mandated by their headquarters to manage costs effectively over the last 12 months. In addition to this, the depreciation of the rupee against all major currencies favoured reduction in cost across MNC R&D centres in India.

 

According to Zinnov, the cost of running an R&D centre in India was in the ratio of $39,000 per full time equivalent (FTE). An FTE is an employee engaged on a regular basis. This has seen an increase of more than 15 percent till 2006, but decreased for the first time in the last five years.

 

Source: The Economic Times