Wages at IT multinationals start melting down

Bangalore: Software multinationals in India have begun freezing wage increases, slashing salaries and postponing merit-based hikes, a study by Indian consulting firm Zinnov has found.

"Though Bangalore stands highest in its average salary for multinational R&D firms, followed by Pune and Chennai, the economic slump is causing undue pressure on them to retain compensation levels," Zinnov director for advisory services C.S. Chandramouli, told IANS after the survey was made public.

Hinting that IT salaries in 2009 would see a freeze across the board in a majority of the firms surveyed, Chandramouli said the average increment would be in the 5-12 percent range.

"Of the 30 representative multinationals surveyed in these three cities (Bangalore, Pune and Chennai), 27 percent of them said they have frozen salary increases this year, while 42 percent said they would provide salary increases and 15 percent have postponed their merit increase cycle to take a call at a later stage if the economic scenario changes," Chandramouli said.

As a preferred destination for IT services and R&D, about 680 multinationals operate in India. Many of them have more than one R&D centre and presence in one or two of the three cities surveyed.

According to Zinnov's annual report on "Compensation and Benefit Study 2009", 12 percent of the MNCs have announced 5-10 percent salary cuts either for senior management or across levels.

"The survey highlights that multinationals are also shifting focus to the variable pay component to reward and retain top performers as opposed to fixed pay. Some of them have even restructured their compensation, linking employee rewards to individual and organisational results," the report said.

Referring to the adverse impact of the tough economic conditions on the compensation budgets, Chandramouli said MNCs were attempting to balance their need to retain key talent and address concerns over wage increase.

"Organisations are being proactive in managing people cost as it constitutes about 62 percent of the total operating cost," he noted.

Highlighting compensation trends across functions like engineering, quality assurance testing and technical architects, the report said senior positions such as engineering manager and director engineering continued to be on a rise, with an average eight percent increase.

As India's IT hub, Bangalore, however, continues to dominate the compensation index, especially in software product and R&D.

"Bangalore engineers are paid five percent higher than their counterparts in Pune and eight percent higher than in Chennai for engineering and quality positions," Zinnov consultant Sahana Shetty said.

However, average salaries of senior positions in the three cities are similar, though average salaries at junior positions are two-three percent higher in Bangalore.
"Employees are not clear if they will be laid off or if the projects they are working on will be de-prioritised. They are also concerned about the financial health of the parent company. Employees are frustrated with cost cuts for wha

t seem like inexpensive benefits (snacks, lunch, office parties, etc)," Shetty added.

HP is the consumer PC king

This year we clubbed together the consumer notebook and consumer desktop categories, and called it PC-Consumers. Reason—notebooks now account for more than 50 percent of the PCs sold to consumers and SOHOs.
HP with its dual brand (HP and Compaq) strategy topped this category by ranking higher on three out of five criteria. HCL, on the back of its strong tier-3 and tier-4 channel connect, came second. Lenovo and Dell both ended up with same final scores thus sharing the number three spot followed by Acer.
While the desktop business has been HCL’s strength, its notebooks are seeing good demand especially in smaller cities. Lenovo, which began the year by consolidating its consumer business under the Idea brand, has been criticized for favoring Large-Format Retailers, especially in tier-1 cities. Lenovo retailers polled blamed the vendor for letting LFRs sell products at much lower prices than theirs.
Dell made strong strides in the retail segment on the back of its brand pull, onsite warranty and better price-performance. But, respondents said, to rank higher on channel preference Dell still needs to prove its commitment and consistency.
While respondents appreciated Acer’s improved retail program, the vendor’s marketing and post-sales support need improvement. It also needs to review its LFR strategy.

Price-performance
HP was the overall price-performance leader in both the notebook and desktop category, followed by Dell, HCL, Lenovo and Acer. Despite Dell’s lower MOP, where HP scored was on the freebies it bundled with its products. Dell ranked ahead of Lenovo, Acer and HCL for notebooks, while HCL fared better for desktops, primarily because of favorable votes from resellers in smaller cities. Interestingly, Acer, despite its competitive pricing, scored the lowest on this parameter.

Marketing & branding

On this criterion HP leads, followed by Lenovo, HCL, Acer and Dell. The HP-Compaq duo enjoys strong customer pull; it was also ranked the most aggressive in rolling out consumer and channel incentive schemes. Throughout the year the company gave away freebies with its notebooks and desktops, which helped its partners sell more.
Lenovo, which ranked second on this parameter, enjoys customer pull in tier-1 and tier-2 cities, but in smaller cities it is still considered a push brand. HCL enjoys a brand pull like no other in smaller cities, and also does more promotions in these cities compared to tier-1 and tier-2 geographies. Acer lacks customer pull in small cities, while Dell lacks promotions and schemes for end-user demand generation.

Service & support
Dell’s onsite warranty policy is a clear winner. Many respondents believe that onsite warranty should become the standard in the consumer segment. HCL came in second by getting higher positive votes from smaller cities.
HP, despite the warranty woes of the past four months, ranked ahead of Lenovo and Acer. Lenovo partners polled said that the company suffers from a longer turnaround time than its peers for repair and replacement.
Though Acer’s RMA turnaround time is similar to Lenovo’s, what probably puts it behind is the consistent grouse among respondents in tier-1 and tier-2 cities about the frequent change of service partners and the lack of communication about these changes. Even the company’s Web site doesn’t have an updated list of ASPs, thus creating confusion among partners and customers.

Channel relationship
HP’s retail program was rated the most structured and consistent. Respondents appreciated the vendor’s rebate programs and its automated rebate authorization and clearance process.
HCL ranked second on this parameter because it enjoys a strong positive association with channels in tier-3 and tier-4 cities, where it outperformed even HP.
Lenovo needs to improve its clearance process as it’s currently ridden with disputes and delays. Resellers, especially in tier-2 cities, complained of frequent changes in local staff and authorized dealers, which is affecting Lenovo’s channel relationships.
Acer ramped up its retail partner network and also introduced new benefits for them. While respondents in tier-1 cities criticized its LFR strategy, those in smaller places complained of not getting regular communication about products and prices.
Dell failed to win the trust and confidence of respondents. The pricing disparity between its products sold through channels and those sold online continues to pique respondents. But Dell’s better price-performance and onsite warranty continue to push channel sales.