Mukesh Mathad | Srinivas Rao Bhagavatula
The implementation and success of initiatives such as ‘Make in India’ have helped our country emerge as a global engineering and design hub for various domains and industries.
In fact, after digital, engineering R&D (ER&D) has been identified by National Association of Software and Services Companies as holding 16 percent of the Indian IT and BPM market and growing at a rapid clip of 13 percent compound annual growth rate (CAGR).
Considering the growing importance of this segment, Nasscom has created a separate council to strengthen the momentum of ER&D activities and meet the needs of service providers in the industry.
Including representatives from diverse verticals, this council is
expected to study in detail the ER&D ecosystem in the country and provide the more than 1,500 companies in its ambit with resources, opportunities and cutting edge-solutions to optimise their potential.
The Engineering R&D landscape: Global prospects
The $75-80 billion ER&D global services industry is expected to grow at a rapid pace (14-16 percent YoY) and reach a valuation of $145-155 billion by 2020.
This growth is fueled by an interplay of digital and ER&D. With the evolving needs of overlapped products and services, a need to integrate new technologies with products is evolving fast. A paradigm shift in consumption patterns is being observed as more and more consumers are looking to be a part of and consume an experience “as a service,” which is essentially an end-to-end journey from new product creation, design, market strategies, utilities offered, feedback mechanism etc.
Comprehensive transformation of the sector
The integration of IP-driven core ER&D differentiation with service components has led to newer and longer-term revenue streams. This has also led to an evolution of a new ecosystem of partners and an accelerated geographical reach for businesses.
With the explosion of digital devices and associated services, traditional ER&D has created new revenue growth possibilities by providing a “connected eco-system” with the intent of monetizing data, base services, and value-added services.
Simultaneously, the focus of the government to expand the domestic market through a focus on indigenisation and self-reliance has led to capability building among Indian organizations for future relevant domains such as Product Engineering, Data Analytics, Embedded software etc.
The challenges of Indian Engineering R&D: Still a follower than a trend-setter
In the last couple of years, the engineering services segment has grown faster than IT services.
However, it continues to face challenges with limited global eco-system connect, lack of innovation culture and availability of converged digital and ER&D skills.
From curriculum development to approaching a solution, Indian ER&D sector is always playing catch-up to global innovations and trying to adapt the technologies rather than develop original ideas.
The Indian defense sector is a glaring example of how India is yet to develop its potential capability in meeting the defense requirement and reducing imports.
Increasing collaboration between public and private players, indigenisation efforts, and goal-driven talent training can help to change the current scenario significantly.
Additionally, increased need for hyper-localised products and services with local context and challenges, high demand for talent with the right domain knowledge and cross-functional expertise along with co-innovation engagement models will benefit the Indian ER&D service players to develop global products, deploy world-class services and to innovate at scale.
The way forward
However, along with these changes, ER&D organisations must embrace a Digital way of working: development needs to align to the nimble nature of Digital – DevOps, and Agile, to be able to deploy products and services rapidly.
Additionally, the ER&D organization needs to re-imagine the product and
services development lifecycle with new, varied partnerships and collaboration models for co-engineering and co-innovation.
A number of disruptive trends in the ER&D ecosystem have led to the emergence of new players in the market with increased mergers, acquisitions, and partnership activity. With cloud as a catalyst for service expansion and democratization of services, the emergence of new global ER&D players and partners, the inception of new mutually beneficial commercial models for partners and OEMs, this segment is witnessing hyper global competition and explosion of opportunities.
To sum it up, transformation in ER&D segment, while hindered with its fair share of challenges, disruptions, and competition, will result in new revenue streams, new partnerships, and new ways of working.
This will have a transformational effect on the industry as a whole and will open new avenues of business, contributing to India’s gradual rise as the ultimate global ER&D powerhouse.(The authors are Associate Vice President, Hi-Tech, and Media and Associate Vice President and Head of IoT Group at Bengaluru-based IT firm Mindtree Limited)