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Nasscom-BCG Seizing the ER&D Advantage – Frontiers for 2030

October 12, 2023 2325 0 Engineering Research & Design nasscom insights

Nasscom-BCG Seizing the ER&D Advantage – Frontiers for 2030

Each year, each decade, brings immense opportunity and with it varying degrees of flux. Today is no different. varying degrees of flux. Today is no different. We stand at the cusp of a new era of Engineering Research & Development (ER&D), amply clear that the acceleration of ER&D intensity is no longer a choice but a necessity, an imperative. Global business ER&D spending is experiencing remarkable growth. In addition, ER&D sourcing is on the brink of unprecedented expansion, fueled by the imperatives of access to a global talent pool, the pursuit of greater agility and scalability, and cost optimization. This presents a wealth of opportunities for industry players and economies worldwide. The nasscom- BCG report titled “Seizing the ER&D Advantage – Frontiers for 2030” aims to represent an insightful exploration of the transformative forces shaping the ER&D industry and how the industry will shape up in the year 2030. It details out global ER&D spending, mega trends shaping the industry, sectors leading this growth, etc. today as well as in 2030. In addition, it also gives insights into India’s share in the global sourcing market, and sectors leading this growth. It also includes opportunities within these sectors across countries globally which are relevant for penetration for India today as well as in the future.

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Key Highlights

 

  1. Increasing Global Business ER&D Spend
    1. Globally, ER&D spending has accelerated post pandemic and has witnessed a CAGR of 7-8% from 2020 to 2023
    2. Five mega trends for this growth include Digital Engineering, Climate & Sustainability, AI Augmentation, Service Orientation, Population and Skill Inversion
    3. The key sectors are undergoing massive technology disruption, thus necessitating investment in ER&D to develop new products, solutions or transform their operating models. The top 3 sectors are automotive, healthcare and medical devices, and energy, and energy, utilities and oil and gas.
  2. Global ER&D spend by Sector & Geography
    1. As a result, the overall Global Business ER&D spend is expected to go from $1.5 1.8T in 2023 to $2.5 3.3T in 2030, growing at a CAGR of 8-9% during this period. 
    2. Top 3 sectors are expected contribute to ~50% of Global ER&D Spend by 2030 are expected to be Healthcare & Medical Devices, Automotive and Telecommunications.
    3. Apart from the largest market of US, other 6 key geographical region/countries present significant ER&D spend and these include Japan, South Korea, Germany, France, United Kingdom, and Nordics in 2023.
  3. Global ER&D Sourcing & India Opportunity
    1. Total ER&D Sourcing is expected to go from $210-280 Bn in 2023 to $600-770 Bn in 2030. This is driven by desire to access lower cost talent and ability to build large teams ( talent@scale). Additionally, increasing scalability and agility has now become a key driver for sourcing across all sectors
    2. India remains a major destination for ER&D sourcing with $44-45 Bn spend in 2023 , and in future it is expected to retain its strong positioning with an expected spend of $130-170B in 2030.
    3. However, some emerging locations are expected to present stiff competition. These include Thailand, Malaysia, Poland, Colombia, Bulgaria. 
    4. India, however, is the only country which has a unique offering of large number of STEM graduates along with a competitive innovation index amongst mid sized economies.
  4. Imperatives for India to succeed

    To achieve this growth, a robust action plan is needed for India and these include - 

    1. Infrastructure & Policy support: Provision of robust infrastructure, incentives, etc. for players wanting to enter India and focus on building an ecosystem to foster innovation.
    2. Branding & Promotion: Promotion of India as a preferred ER&D destination globally through events, fairs, etc.
    3. Skilling & Research focus: Focus on developing relevant talent at scale by assessing industry demand for skillset and focusing on curriculum redevelopment, hands on training through internships, etc.

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