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Business News/ Industry / Infotech/  Software firms’ R&D centres in India facing double-digit attrition rates
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Software firms’ R&D centres in India facing double-digit attrition rates

MNCs like Microsoft, Adobe face growth slowdown with key personnel quitting to join start-ups or launch ventures

Headhunters say attrition rates are set to touch 20-25% annually, making it difficult for such product makers to hire and retain top talent. Photo: Hemant Mishra/Mint (Hemant Mishra/Mint)Premium
Headhunters say attrition rates are set to touch 20-25% annually, making it difficult for such product makers to hire and retain top talent. Photo: Hemant Mishra/Mint
(Hemant Mishra/Mint)

Bangalore: Research and development centres at Yahoo Inc., Microsoft Corp., Adobe Systems Inc. and other multinational software product firms are facing a slowdown in growth and product development work in India as they battle double-digit attrition rates with key personnel quitting to join start-ups or launch their own ventures.

Headhunters specializing in talent for large software product firms in India, executives at emerging start-ups and entrepreneurs said attrition rates are set to touch 20-25% annually, making it difficult for such product makers to hire and retain top talent.

“They are losing people to start-ups. And why is that happening? In the MNC captives, people’s careers are stagnating and many people are saying, ‘Look I’ve built this product, I’ve gone through five product cycles. Why not go through a product cycle at a smaller company because I can get better value out of that?’," said Sharad Sharma, chairman of the Nasscom Product Forum and entrepreneur-in-residence at Canaan Partners, a US-based venture capital firm focused on technology start-ups.

Take, for example, 30-year-old software architect Mohammad Aamir, who recently quit his job at Adobe to join an enterprise mobility start-up Bitzer Mobile Inc. After six years of working on a single product at Adobe, Aamir felt he had reached a saturation point and needed to work on newer products.

“In a big company like Adobe or Microsoft when you work on a product, you end up working in big teams, where you often tend to get sidelined and your presence is not noticed. You don’t have the level of exposure or responsibility that you get at a start-up," said Aamir. “At my new workplace, I’m involved not only in technical management, but also people management and business development. I’m at the top level of the picture."

Also, the entrepreneurial environment is becoming increasingly conducive to start-ups in India, with more angel investors and venture capitalists willing to throw their weight behind innovative ventures.

Even though average attrition rates for the country’s R&D industry have not increased, the levels haven’t dropped either, experts said. India’s R&D industry accounts for 200,000-300,000 engineers working in more than 700 multinational firms, according to technology advisory firm Zinnov Management Consulting Pvt. Ltd.

“With the number of offshoring jobs coming into the country not that high right now, attrition should have ideally slowed down. But that has not happened," said Anshuman Das, co-founder and chief operating officer of CareerNet Consulting, a company that recruits engineers for product development centres at MNCs. “Thanks to so much entrepreneurship happening out here, attrition rates are still kind of similar, which is 15-25% range, that I still see happening."

Another reason for the stagnation in growth is that India doesn’t figure high on the value chain, with many of the MNC’s centres in India contributing only 2-3% to their overall global revenue. Also, many MNCs have reached the maximum level on the amount of R&D work they can send to India, which is 30-40% of their overall R&D activity, said Sharma.

“Will it be 60% tomorrow or 80% tomorrow? It’s very, very unlikely. They logically can’t offshore more than 40% of their R&D... They’re building a product that the company is selling to the market, so it is core to the market and, therefore, there’s a limit to how much they can offshore and that limit is being reached," Sharma said. “Also, with some of these technology changes that have taken place, cloud-like changes, the team sizes of products have shrunk."

Incidentally, Sharma, who quit Yahoo in 2009 after two years as its research head in India to join Canaan, helped form a separate forum for product companies last month called the Indian Software Product Industry Round Table, or iSpirt.

According to industry executives, even if a products team becomes smaller, the co-ordination costs remain the same.

Google and Adobe did not respond to requests for comment. Yahoo India R&D did not comment on the attrition figures, but its vice president and CEO Shouvick Mukherjee said in an email, “We have seen a reverse trend in recent years where a lot of folks working for us in the US have been coming back to India to work at our Bangalore centre... Even people who left Yahoo to join start-ups have chosen to return for a second innings..."

Microsoft did not provide a break-up of attrition levels for the last two years but said in an email response that the average attrition rate at their India R&D centre was 7% for the last five years.

Flipkart Online Services, the country’s largest online retailer, has been one of the beneficiaries of the exodus from multinational tech firms.

“Experienced technologists from MNCs are attracted to us because it gives them the chance to own and build solutions and do it on a large scale—and we have seen senior talent from established product companies joining us in large numbers over the last couple of years," Flipkart chief people officer Aparna Ballakur said in an email response.

Some experts say multinational firms are learning to do more work with fewer people.

“Most of these GICs (global in-house or R&D centres) are trying to add more value to the job, with the headcount not growing as much as the revenue growth is. They’re doing more work with less people," said K.S. Viswanathan, vice president of industry initiatives at industry lobby National Association of Software and Services Companies, or Nasscom.

Also, India has not lived up to the hype of being a hub for innovation—something that was widely projected after the dotcom boom in the mid-2000s.

“Most of these MNCs are not launching their new and upcoming products in India. So, as a result of that, a lot of new products are not happening in India and it’s mostly the sunset products which are happening in India, and hence the kind of work you end up doing is not something that you feel does justice to your competency," said Das.

A Zinnov study issued last week seems to support that theory. The study, conducted among 100 multinationals with an R&D presence in India, revealed that only 26% have global roles based in the country despite over 40% of the headcount being located here.

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Published: 13 Mar 2013, 07:50 PM IST
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