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Spotlight on Germany's evolving ER&D operating model strategy: Tapping into India advantage

January 24, 2025 115 0 nasscom insights Engineering Research & Design

Spotlight on Germany's evolving ER&D operating model strategy: Tapping into India advantage

This report explores the changing ER&D landscape in Europe and delves deeper into the German market as a forerunner. It aims to provide an overview of the key Engineering, Research, and Development (ER&D) trends impacting Germany and sheds light on top five sectors highlighting the R&D spend priorities and use cases. Covering the key ER&D investment priorities for German-headquartered companies across the themes of digitalization, autonomy, and sustainability, and emerging skills (both core and digital) in demand, the report provides a comprehensive analysis. Priority within the ER&D sector has evolved to prioritizing time-to-value challenging the status quo of the German companies. As German ER&D companies focus on retaining their dominance, capitalizing on the gains from digital engineering, intelligent R&D, and innovation is becoming a key imperative. In this scenario, India has emerged as a key supply market and a leading global hub for engineering services – for both GCC and ESP-led models.

Key Highlights

  • Germany and Europe ER&D Industry
    • Europe accounts for ~24% of global R&D spend as of FY 2023, with Engineering, and R&D (ER&D) remaining a cornerstone of innovation and economic growth for the region.
    • Germany leads the pack in Europe in fostering ER&D excellence, accounting for ~36% of Europe’s spend on R&D.
    • Automobiles and Parts (Auto), Electronic and Electrical Equipment (EEE), Software & Computer (S&C), Healthcare Equipment & Services (HE&S), and Industrial Engineering (IE) remain the top ER&D spend sectors.

 

  • Key Themes, and Drivers
    • ER&D strategy of successful German and European companies is underpinned by digitalization powered by autonomy (i.e., autonomous systems) to achieve sustainability-centric innovation.
    • Key Drivers for Germany’s R&D growth – Core engineering talent pool availability, governmental support for R&D ecosystem, strong industry-academia collaboration, and a thriving start-up ecosystem.

 

  • Future Proofing German ER&D – The India Advantage
    • With the shift towards digital engineering across sectors and value chain, organizations prefer to use India centers with their tech-savvy talent pool.
    • India’s sizeable opportunity in German and global ER&D industry is defined by its matured Global Capability Center (GCC) and Engineering Service Provider (ESP) ecosystems that coexist and continue to flourish.
    • While offshoring to GCCs and outsourcing to ESPs have traditionally been the most preferred models for ER&D organizations, a burgeoning interest in co-creation with start-ups, academia and competitors is redefining the India ER&D industry.

 

  • India ER&D Landscape
    • ~24 percent of the global top 50 engineering service providers are headquartered in India, that cater to the German and the global market.
    • India has emerged as the GCC capital of the world with a significant market share.
    • India’s ER&D segment forms nearly 1/4th share of the total Indian tech industry in terms of revenues.

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