Global Location Analysis: Landscape update

January 29th, 2012

Today, business leaders of various MNCs are focusing beyond domestic workforce and skilled immigrants as part of their talent acquisition plan. This stands true not only for large corporations but for all organizations (irrespective of size) that are creating & managing remote, virtual teams to remain competitive in the marketplace. However, any business case on globalization can’t be complete without a clear evaluation of talent ecosystem in the outsourcing destination. Once a firm has identified the business aspects that it intends to transition, the following are the key questions on talent that a firm looking to globalize its operations should take into consideration:-

  • What are the key skills or capabilities required to deliver outsourced operations? What is the required headcount for the same?
  • Which outsourcing destinations provide the talent pool required with the identified skill sets or capabilities?
  • At what cost point is talent pool with requisite skills available for hire?
  • How can the firm attract and retain these resources required to deliver the outsourced operations?

This report aims to provide information about the above mentioned talent pool aspects at key global outsourcing destinations (both established and emerging locations). It also provides information on current and project talent pool, compensation costs, attrition, and hiring challenges. The domains covered in the report include IT services, product development (hardware & software), technical support, and BPO.

Zinnov has studied the following global locations as a part of this report:-

·         Argentina

·         Brazil

·         Egypt

·         India

·         Russia

·         China

·         Vietnam

·         Malaysia

·         Philippines

Download the free preview report from the following link.

http://zinnov.com/pdfFiles/1327899042full_Global_Location_Analysis.pdf

To read the complete whitepaper, please send us mail at clientservice@zinnov.com

R&D Globalization: A Ukraine Perspective

January 23rd, 2012

Ukraine is the second largest contiguous country on the European continent, after Russia. As compared to established locations such as India and China, Ukraine does not figure as prominently on the radar of companies looking to globalize their R&D operations. During the period 2000- 2008, foreign direct investments inflow increased in the country, which indicates that Ukraine is emerging as one of the key economies in Central and Eastern Europe (CEE).

Among all the CEE countries, the IT offshoring market in Ukraine is the largest and also growing rapidly. A quick glance at the offshoring activity indicates that compared to other CEE countries, Ukraine delivers higher percentage of high-end R&D as a percentage of the IT offshoring market.  The high level of R&D activity can be attributed to the fact that the talent in Ukraine is capable of performing new product development and similar high-end activities. The presence of advanced education system which originated from the Soviet Union can be credited for the quality of talent pool available in Ukraine.

The presence of highly skilled R&D talent pool is one of the key factors that has resulted in country witnessing its R&D offshore market grow at more than double the rate of that of the CEE average in 2004-08. Other factors like lower cost of operations, supportive government policies and proximity to EU countries are also helping drive R&D outsourcing to Ukraine. Other factors such as lower cost of operations, supportive government policies and proximity to EU countries are also driving R&D outsourcing to Ukraine.

The focus of this report is to provide a detailed overview R&D market size in Ukraine together with the key drivers behind offshoring R&D to Ukraine. In addition, the report also provides insights on key R&D locations that are offshoring hubs in Ukraine. To complete the overall R&D landscape in Ukraine, the report also focuses on the challenges that may hinder the progress of Ukraine as a key R&D offshoring destination.

Download the free preview report from the following link.

http://zinnov.com/pdfFiles/1327060386full_Ukraine_R_D_Landscape_Final_Q12010.pdf

To read the complete whitepaper, please send us mail at clientservice@zinnov.com

MNC R&D Ecosystem in China

January 23rd, 2012

China has emerged as a key location for outsourced R&D operations especially in Telecom, Software and Electronics. The offshoring wave in China started nearly a decade later than in India. However, today, the country is competing with India and already being considered as an established offshore destination. A quick look at the following facts will help to understand the position that China holds in the global offshoring landscape:-

  • In 2011, R&D investment of global firms in China was USD 7.65 billion, which was only a bit lower than India where R&D investment was USD 7.75 billion. However, taking in to consideration that China’s market is growing nearly 50 percent faster when compared to India, the MNC R&D investment in China is expected to soon overtake that in India.
  • MNC presence in China is higher with nearly 1100 MNCs present in the region (roughly twice as compared to that in India). Similarly, the total number of R&D centers present in China is also high.
  • In addition, the availability of fresh talent pool suitable for R&D i.e., 56,000, which is roughly 10,000 graduates higher when compared to India and presence of large number of engineering graduates and PhDs in the country, makes it a preferred offshoring destination. However, in terms of average annual cost/FTE, India has a slight edge over China (but this factor is increasingly losing importance as business drivers for globalization are shifting from cost to innovation).

Though language barriers and IPR issues exist, global businesses can no longer ignore China as the region presents huge business opportunities. It is essential for MNCs looking to operate in China to gain understanding of the current R&D landscape. Undertaking R&D activities in China helps in achieving this objective as it provides the advantage of remaining close to market and consumers in China. This report aims to provide a comprehensive coverage of the MNC R&D landscape in China along with the key trends that point towards paradigm shift that the R&D landscape is currently undergoing. This includes the following:-

  • Continuous growth of MNC R&D centers in China
  • Emergence of Tier-2 locations as new centers of growth
  • Rising competition for MNCs from domestic Chinese firms
  • Change in innovation philosophy of MNCs in emerging geographies
  • Expansion of work portfolio by MNCs in China
  • Diminishing cost arbitrage advantage for MNCs in China

In addition, the report also throws light on the role that Chinese government plays for increasing R&D investment in the country.

Download the free preview report from the following link.

http://zinnov.com/pdfFiles/1327378229orv_China_RD_Ecosystem_Analysis_Talent_Perspective_.pdf

Latin America Talent Hotspots

January 19th, 2012

Latin America has grown to be a region of great promise for the global sourcing industry. It has the attributes that have made emerging markets attractive to outsourcers, such as low wages, modern and extensive infrastructure, sizeable talent pool etc. The geographical proximity to US, dual language capability (English and Spanish) and cultural compatibility has ensured that the region can serve as an ideal near-shore destination. In recent times leading companies such as IBM, Motorola, Intel, HP, Amazon, Accenture, Citibank etc. have set up their captive units in the region.

Local governments in these countries have enabled the IT-BPO businesses to boom by providing financial and other support such as favorable tax regimes, simplified corporate/labor laws, reduced regulatory hurdles etc. E.g. in Costa Rica, under the Free Zone Regime, services companies that export more than 50% of the production in Costa Rican operation enjoy a 100% exemption on corporate income tax (8 years, 50% exemption during the following 4 years). Focused initiatives such as IT Action Plan in Argentina have also been set up to promote software and IT services in the region. No wonder then that the number of business process outsourcing (BPO), shared service centers (SSC), call centers, offshore delivery centers have grown significantly in the last few years.

Latin America has emerged not just a region to serve the US, but it also offers a fairly significant domestic or regional opportunity especially in countries like Brazil and Argentina where the domestic market is also fairly large. The local economies in most of these countries is fairly stable and is expected to grow significantly in the coming years presenting a clear business opportunity for companies in the region. Companies like TCS have expanded their regional presence by setting up Global Delivery Centers across Argentina, Brazil, Chile, Colombia, Ecuador, Peru, and Uruguay to service international and domestic clients in key verticals such as Banking, Hi-tech, Insurance etc.

For companies that see Latin America as a destination of choice, it is important to be aware of the significant variations in the talent pool and location aspects. For example, countries like Argentina and Brazil can support fairly large scale centers, but others such as Colombia, Costa Rica can only support small centers purely because of the size of the workforce in these countries. Also, for companies looking at tapping into both the domestic and offshore opportunity, some of the larger countries will be more favorable to locate in.

This report aims to provide a comprehensive coverage of few key cities in Latin America on location and talent pool aspects. Armed with a clear understanding of the labor pool in these markets, infrastructure, and local business climate among other information, firms can adapt their globalization programs to leverage the advantages and overcome the challenges of operating in the region.

Download the free preview report at
http://zinnov.com/pdfFiles/1327007797orv_Latin_American_Talent_Hotspots_overview.pdf

Global Skill Analysis Model – Framework

January 16th, 2012

The Skill Analysis Model caters to the growing need of organizations to optimize and manage skills to get a competitive edge. Technology organizations today while making headway in globalizing their functions are often disadvantaged with their global talent strategy, which lacks a comprehensive skill tracking and estimating system. The Skill Analysis Model arises from this gap among organizations in tracking the required hard skills and in assessing their employees’ hard skills, domain skills and competencies. It addresses the need for a well-chalked out futuristic strategy with a continuous human capital capability management and skill monitoring system to enable global centers achieve their goals.

Designed to address the need among organizations to define their product and global centre roadmaps as well as to understand the skills required in future for various products, the Skill Analysis Model covers one of the key aspects of global talent planning. The model features as a reliable system that regularly estimates hard skills, domain skills and competencies of employees across centers of an organization giving a fair view of the skills distribution both in terms of employee and from the product requirement perspective. It is driven by a robust methodology whereby data is collected from surveys designed specifically for various levels of organizational hierarch. It is equipped with data from a thorough analysis of hard skills, domain skills and competencies. Apart from drawing an estimate of skill distribution by product family, job level, reporting structure and function at different global centers, it also highlights gaps at different global centers and variations in expertise level within the same skill set thereby facilitating a foresighted talent strategy and training program.

With the complexity of a workforce distributed across various experience and functional levels across global centers, the skill analysis model enables a quick talent ramp up at the headquarter location and the global centers. It helps save on people cost, improve efficiency and implement required trainings. The peer group analysis gives a very precise and detailed picture of how an employee rates in comparison to his peer. The profile builder comprising the ideal skill requirement, competency level and team composition data gives a ready estimate of the product-wise skills requirement, plays a crucial role in global centre and talent roadmap and assists in talent planning and team composition. We are in the midst of a global transformation with changes affecting various industries as well as the global labor force. At such a time an organization can derive multi-pronged benefits from deploying the Skill Analysis Model.

Download the executive summary of the report here http://zinnov.com/pdfFiles/1326741279orv_Global_Skill_Analysis_Model.pdf

Location Modeling and Results- Cost Variations

January 15th, 2012

Our recent research it quantitatively demonstrates the labor cost factor (which needs to be taken into consideration when selecting a location for a service organization) varies significantly by the location, skills and required experience levels.

For e.g., Noida city in India has the largest salary range where more than 50% (everything above dark line which exhibits median)resources with the experience of 0 to 3 years fall under the salary range of USD 3,800- USD 4,400. On the other hand, in the same category, Jaipur city in India exhibits the lowest salary range with 50% resources falling under the salary range of USD 2,850- USD 3,100.

Research also indicates that median salaries for 3 – 7 years of experience are not as volatile as in ‘0 to 3’ years of
experience level.

For the experience category of 7 – 10 years, all cities exhibit downside salary inclination indicating a saturation level. Similar is the case with variability of salaries in which all cities exhibit weakness. This also indicates that with the
increase in the experience level, the difference in lower side of labor cost decreases.

For additional details, download the free report at http://zinnov.com/pdfFiles/1326687989orv_1319338000full_Zinnov_GTL_Location_Modeling_and_Results.pdf

What is a Compensation Chain?

January 8th, 2012

The recently completed global salary benchmarking study by Zinnov has yielded multiple valuable insights on the pricing of global talent. One such insight is around the variability that exists for the same job level and experience in emerging locations. Zinnov defines this variability in pay level for the same job position as “Compensation Chain”. If the variability is higher, then the compensation chain is longer and vice versa.

The following chart is an illustration of this variability across different locations. This chart illustrates that on an average you can hire an entry level IT employee in the salary range of USD 4,760 to USD 10,200 (a variance of 114%).

Image

Why is it important to understand Compensation Chains?

  • Compensation Chains are driven by several factors including education and the presence of MNC companies vs. local companies.
  • In countries like India, there is pay difference based on the university attended (which is more prominent than in the western countries)
  • Several alternate curriculum feed the talent pool in countries like India (computer diplomas as opposed to degrees).  This lengthens the compensation chain as well.
  • Traditional Benchmarking will get difficult in such situations.  Very often, when comparing with benchmarking results, companies will find that the numbers are significantly different.  Hence peer group analysis is more relevant than traditional benchmarking.
  • Business case may look more attractive than usual.  As job titles are similar within the compensation chain, analysis towards globalizing jobs will look super attractive on paper.  When it comes to execution, the savings may evaporate.
  • Longer compensation chains may provide more flexibility to execute work as different levels of work can be executed by different levels of talent within a job role.

For more details, please download the free report at

http://zinnov.com/pdfFiles/1326217212orv_Compensation_Chains_2011.pdf

Vijay Swami
Co-Founder and Managing Principal,
Zinnov LLC

Labor Cost Analysis: Pay Variation for Engineering Workforce

October 23rd, 2011

United States of America (USA) dominated in engineering science and technology aspects for the most part of the 20th century. Recently, the significant changes in communications, manufacturing, health and infrastructure that created spill-over-effects on the development of other countries. However, the emergence of markets and competitive education system has enabled the emergence of new engineering workforce across Europe and Southeast Asia.

In this situation, every country is promoting to build such talent. Availability of immense human capital at low costs has become major strength for countries which promises how goods/services will be invented and serviced optimally.

Quantitative study on how global pay differ across major engineering hubs in the emerging countries shows that

  • Engineering resources in Brazil are expensive. Russia and Taiwan demonstrate their course towards the high labor cost zone.
  • China and Malaysia are currently in above medium labor cost zone.
  • India currently showcases lower labor cost. But, in future it may enter into the medium labor cost zone. It is unlikely to reach China and Malaysia levels anytime soon.

For additional information, download the report here http://zinnov.com/pdfFiles/1326687020orv_1319346443full_Zinnov_GTL_Pay_Rate_PointOvView.pdf

Pradeep Mavuluri,
Senior Consultant -Analytics
Zinnov

Labor Cost Analysis: Consequences of Experience and Vertical on Labor Cost

October 13th, 2011

Skilled ‘Human Capital’ plays a key role in organizational sustainability.  New technologies have raised competition to such a level that it has become essential to identify the best skilled talent pool available at lowest possible cost anywhere in the world.

It is difficult for any country to emphasize on all required skilled workforce.  By evolution or design most countries end up choosing few funcational areas for specialization.  This has an adverse affect on the labor pool as high skilled low cost labor in other verticals start aspiring for more increments.

As we analyzed the low cost destinations in China, India and Philippines and understand the viability of executing long term sourcing strategy in these locations, the key findings are the following:
  • Vertical Laterality is very critical for a location strategy.  It is important to understand the vertical laterality from the long term viability standpoint.
  • To understand vertical laterality, we need to consider the minimum of least experience group (0-3 years) and maximum of most experienced group (10+ Years).
  • If the spread of vertical laterality is high then it may pose long term risks to globalization strategy.ft

For additional information, download the report here http://www.zinnov.com/white_paper_register.php?req=wp&art_id=153

Pradeep Mavuluri,
Senior Consultant -Analytics
Zinnov

Best Practices to Build Technical Leadership at Global R&D Locations

September 4th, 2011

Today, most Technology/Innovative companies have set up their R&D operations in various global locations outside the HQ.  However, these technology centers are facing various challenges in countries such as India, and China. One of the key challenges includes hiring technical talent at senior level or hiring talent at senior technical level. Experienced professionals with in-depth knowledge of product architecture, spearhead design, and who can influence product roadmap are difficult to find.

Often, we are asked, ‘How to build technical capabilities at my global center?’ This blog summarizes the best practices that we at Zinnov have compiled through in-depth research. Many top MNCs have successfully implemented these best practices. You can write to us at info@zinnov.com for complete case studies and implementation support.

  1. Immersion Programs: It includes engaging/ involving promising technical engineers early in their career with senior technical leaders at the HQ. The success of the HQ leader should be determined by the number of engineers mentored and trained by him in the given period of time. At entry level, this can be achieved by assigning mentors/ career coaches to interns so that they can stay connected with the organization from the beginning/ initial stage it.
  2. Mentoring program: Identify and maintain a quality pipeline of technical talent.  This involves identification, mentor identification, and connects.  Companies track the growth trajectory of its engineers continuously.  In a situation where mentors operate from global locations, a structured process should be implemented in which a mentor should train shadows/successors to take on the next role. For example, an architect can train a technologist over a period of time on how to take technology decisions by providing him with adequate exposure.
  3. Emerging technical ladder program: This program can be organized together with the mentoring program.  Engineers from global teams can volunteer to work on a project outside of their regular release cycle. This extra effort will help them in gaining/ building in-depth technology knowledge as their interaction for the additional project will be with some of the senior technical leaders from the organization.
  4. Global English Communication program: One of the essential skills for an engineer is the ability to express his opinions, influence , and convince peers  with clear rationale. This all is impossible without effective communication skills. Today, companies conduct communication programs to help engineers develop influencing capabilities. The other areas of training in this program include effective communication and multicultural exposure.
  5. Short term rotation program –Includes one year onsite program for some of the promising engineers identified by the global center. The focus of this program is on gaining product & domain expertise, and building strong connects with the technical community at the HQ. It is also essential to encourage people practices in the organization, which will help engineers to connect with TDs, architects and build a professional network.
  6. Ideation – Engineers should be encouraged to think out of the box to come up with new ideas and build a business case. If the idea is selected then the next stage involves funding of the idea by the global center to take it to the Proof of Concept (POC) stage. It is noteworthy that the success rate of ideas from global centers increases significantly if the idea is taken to the POC stage. For promoting innovative ideas, ‘innovation month’ should be organized once a year, where engineers should be encouraged to nominate their ideas and compete with global teams.
  7. EvangelizeArticulate the impact of technical leaders on products and innovation.  Encourage employees to opt for technology careers as opposed to people/management ladders.
  8. Creating Role Models: Technology and technologists should be celebrated. Initiatives should be undertaken for celebrating technology within the center by organizing various events, competitions, and rewards. Creating internal role models and they should have the liberty to choose their own team.
  9. University Collaboration – Companies partner with specific universities/professors so that teams obtain/attain exposure to some of the latest research projects.  There are also certain models in which engineers from the organization visit universities to teach students some of the technology modules. This helps engineers in building/ developing capabilities and also enables students to get exposure to production grade technologies.  This can be achieved by tie-ups with academia where employees from the organization visit campus often (and not just for placements), conduct workshops and lectures in campus.
  10. Expatriate Movement: Movement of expatriates continues to be the key for talent/technical leadership development.  Few companies have also adopted ‘Interval Approach’ for expatriate relocation.
  11. Establish Product Management teams: It is believed/ perceived that the productivity of engineering teams can rise up/be increased by 80 percent if product management is co-located.  Provide opportunity to employees for customer interaction in local markets by establishing product management teams at global locations.  Initially, product managers can shadow HQ teams from global locations.
  12. Provide Ownership: Provide end-to- end ownership on certain components of the product which are developed at global locations.  Local leadership should drive the product management.  In this scenario, HQ teams will continue to report to leaders from global locations. Consistently mentor and build next level leadership during the time period.  It is essential to enable technical project management at local leadership level.
  13. Foster the Culture of Innovation: Programs that support innovation, by minimizing risk to an individual and provide resources.  

Author: Chandramouli CS, Director – Globalization Advisory