India’s IT-BPM market (exports+domestic) stood at USD 154 billion in FY2017, a growth of 7.8% over previous year. Of this, the engineering R&D (ER&D) segment account for ~16% share – USD 24 billion. ER&D segment has been and continues to be the fastest growth segment within the industry – CAGR of 13% over last 5 years.
The player landscape comprises over 1,500 firms across ER&D, Product Engineering Services (PES) and embedded systems. GICs dominate this space and the startup ecosystem is also thriving with over 250+ startups.
Digital technologies – SMAC and beyond (robotics, AI, IoT, 3D Printing, etc.) are not just disrupting business but they are also throwing up new opportunities. Globally, there is a very visible shift in the R&D budgets of OEMs towards software & services. A report by strategy& indicates that the growth rate of R&D spend on software (10.5%) and services (6.5%) has accelerated over 2010-2015 vis-à-vis product (3.8%).
As a result, existing IT-BPM players are expanding into ER&D market (e.g., Genpact, Capgemini) and existing ER&D players are expanding into new verticals (e.g., Samsung’s entry into the automotive infotainment market through the acquisition of Harman International). Similarly, with the acquisition of the India business of TES DST Holding Europe (German electronics design services firm), Hero Electronix, a Hero Group firm engaged in electronics design and manufacturing, has entered the embedded systems space.
Software & services re-defining ER&D
- Digitisation & user experience – central themes
- Traditional OEMs – GE, Siemens, Bosch, etc. – re-branding themselves as technology firms
- Robert Bosch moving from being an automotive firm to a connectivity and mobility firm using IoT
- Platform-as-a-Service, Products-as-a-Service, monetizing data through big data analytics
- Newer pricing models due to cloud – pay-per-use
- Infrastructure investments – CoEs, innovation labs, design centres, etc.
- TCS-Intel set up a CoE for IoT - enable creation of indigenous & innovative solutions, establish strong IoT ecosystem, cloud computing and SDN
- Ecosystem play - partnership model – OEMs, cloud/analytics firms, etc.
- Consolidation to build capabilities and access to geographical markets
- IP-based and platform solutions for competitive advantage
- Integrating DevOps and Agile becoming mainstream
- Engineering analytics – emerging area of growth
- Ecosystem collaboration – co-innovation, co-engineering, co-investment
Extracted from Strategic Review 2017: The IT-BPM sector in India