Chennai/ Bangalore: On the back of its value proposition and infrastructural investments by the government, the domestic market in India for engineering R&D services (ER&D) is expected to witness robust growth. It is estimated that almost 10-15 per cent of India’s total ER&D services market could come from its domestic market by 2020 when the country is expected to capture a revenue of $40-45 billion.
According to a report by Nasscom and Booz and Co, the Indian ER&D services market has shown a compound annual growth rate (CAGR) of more than 45 per cent from $1.5 billion in 2004 to $8.3 billion in 2009.
Sectors such as telecom, semiconductors and automotive have been the biggest revenue generators for the industry with embedded software design contributing almost 40 per cent to the revenue base. An indicator of this growth is the increase in the number of offshore development centres (ODC) that provide dedicated ER&D services, which has gone up significantly since 2006.
“From the demand side, India is becoming an integral part of the value chain and Indian companies are developing many core engineering works for their global customers. So clearly, we see Indian companies are now moving from volume to value-based offerings and developing a lot more IPs now,” said Vikas Sehgal, Partner, Booz & Company, a management consultancy firm.
He said engineering and R&D services providers in India including the captives of global firms, who were primarily catering to the requirement of their global customers are now looking at India as a market in a big way. This is happening as a lot of spending is taking place in infrastructure development, energy, telecommunication and roads and building in the country.
“We are seeing companies like Infosys, HCL, Tata and Mahindra Satyam gearing up their sales force in a big way to focus on the local market,” he added. Honeywell Technology Solutions (HTS), the R&D and innovation division of technology giant Honeywell in India, is now developing products catering to local markets. HTS started focusing on developing products for its Indian customers almost 3-4 years ago.
Another key focus area in recent times has been hiring experienced professionals from the US, Europe and within India itself to boost ER&D product development capabilities. “Engineering requires a completely different mindset to address the market. It requires tremendous domain knowledge to service customers,” said BVR Mohan Reddy, chairman and managing director of Infotech Enterprises.
As a result, it is learnt that the total number of engineers with over 10 years of experience increased from 15 per cent in 2006 to 25 per cent in 2009 in India. Overall, India has a base of one million engineers, majority of whom are employed by large Indian conglomerates.
“From our perspective, there is a definite trend where we develop products for the Indian markets. This is not necessarily for Indian companies, but for our global customers who wants to develop products for Indian market,” said GH Rao, corporate vice president, Engineering and R&D services of HCL Technologies. HCL, for example, is developing base stations to be used in rural pockets in India for one of its global customers.
Indian service providers have also invested considerably in expanding their global footprint to service geographically distributed customers. They have established sales teams in North America and Europe and delivery centres in China and Japan for closer interaction with customers in the former and to co-ordinate efforts with existing manufacturing facilities in the latter. Within India, companies have begun to move to Tier-2 cities to take advantage of lower costs of operations and to access a large graduating pool of engineers.
Source : Business Standard. 24/05/10