Engineering, Research, and Development (ER&D) services, meant to help companies design and develop new products and processes, are undergoing a ‘fundamental’ change in their business models with delivery shifting from project execution to full ownership and productised solutions, according to Kishor Patil, CEO of KPIT Technologies and chairman of Nasscom’s ER&D Council.
“How you deliver is changing, the software development process is changing, so fundamentally, a lot of changes. Clients no longer want you to simply deliver what they ask. They expect us to solve their problems end-to-end, and to do it faster,” Patil told Moneycontrol on the sidelines of the Nasscom Design & Engineering Summit 2025.
His comments assume significance as the IT industry’s business models too have undergone fundamental change with an increased deployment of artificial intelligence (AI).
ER&D companies focus on designing, developing, and innovating products, software, and systems.
KPIT, for example, delivers end-to-end solutions in areas like autonomous driving, digital cockpit, and cybersecurity. Patil added that automakers used to take 3-6 years to launch new products. However, with the influence of China and new markets, the auto industry now releases new products every 12 months. This is the accelerated pace that most auto companies are aiming for, he added.
Patil also drew parallels with the IT industry, where the adoption of AI has forced companies to rethink their delivery and engagement models. “RoI in engineering has to be seen in the long term. Many things will not work at first, but we must persist,” he said.
The comments come at a time when India has been positioning itself as a global hub for engineering services, with Nasscom projecting double-digit growth for the sector.
Analysts see the shift toward productised solutions and co-innovation as a mirror to the disruption in IT services, where the traditional ‘time and material’ model has been replaced by platform-driven, outcome-based engagements.
Also Read: IT firms' time & material revenue halves to 35% over 20 years as clients demand accountability
How AI Boosts Testing Efficiency
KPIT’s Kishor Patil said AI in the ER&D space is already reshaping how products are validated and tested, with the company cutting down engineering cycle times by as much as 25-30 percent by deploying AI in validation and testing environments.
“Testing is where the maximum efficiency gains are visible right now,” Patil said, adding that while AI is also being applied in software development, its impact is limited by the availability of usable datasets.
In contrast, there’s more room for efficiency in software development in the traditional IT industry.
The KPIT CEO argued that such efficiency gains are critical for global OEMs under pressure to deliver products faster and at lower cost. “Clients are demanding speed and innovation, and AI-infused processes are one way to achieve that,” he added.
Patil also said that these early wins are only the beginning, and as engineering players accumulate richer datasets, the role of AI in reducing cycle times and enabling more predictive, proactive testing is likely to expand further.
In a separate panel discussion at the event, Krishnananda R Shenoy, Vice President and Head of Next Gen Mobility, Engineering Services at Infosys, referred to an uneven impact of AI across sectors. “In this forum itself, we are seeing a minimum of 50 percent efficiencies in BPO and around 40 percent in IT operations. ER&D and engineering, however, are only at about 15% because the technology and use cases are still maturing,” Shenoy said.
Also Read: AI boosts IT operations by 40%, ER&D gains still at 15%, says Infosys executive
Both executives, however, agreed that talent remains the most critical currency for growth in ER&D.
Chirag Mehta, Vice President and Principal Analyst, Constellation Research, said most recent acquisitions by top IT players of smaller ER&D companies have been driven by talent. Mehta cited the example of aerospace and other engineering-heavy industries, where development requires decades of experience.
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