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India's ER&D Edge: Talent and Tech for Innovation
India's ER&D Edge: Talent and Tech for Innovation

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Despite geopolitical tensions, economic challenges, government protectionism, and supply chain disruptions, the global Engineering Research & Development (ER&D) sector has demonstrated remarkable resilience and growth. From USD 1,564 Bn in 2020 to USD 1,811 Bn in 2022, the increase in ER&D expenditure highlights the sector's ability to thrive amid market volatility, unlike the relatively flat growth seen in IT and BPM functions.

 

The Rise of Digital Engineering (DE)

Digital Engineering (DE), a specialized subset of ER&D, combines traditional engineering with digital tools to enhance processes from concept to production. DE spending has been skyrocketing, with an impressive average growth rate of 20% Year-on-Year (YoY), compared to legacy spends of 2% YoY CAGR. This shift reflects the industry's evolving priorities, focusing on digital tools and technologies to streamline engineering processes.

 

Demand for Skilled Talent

There is a burgeoning demand for professionals skilled in Data Analytics, AI/ML, and Cloud Computing. Organizations need a thriving IT ecosystem and a vast pool of highly skilled engineers to meet the demands and drive innovation.

 

India’s Strategic Role in Digital Engineering

Key Advantages

India, with its rich talent pool, well established Global Capability Center (GCC) ecosystem, flourishing partner economy, and robust government support, provides an unrivaled environment for organizations in the DE domain. Over 1,440 ER&D GCCs operate in India, employing around 3 million skilled engineers across various industries.

 

Success Stories

Google: Developed new features for its search engine, including natural language query understanding.

Microsoft: Created new security features for its Cloud Computing platform, Azure.

Amazon: Innovated to make online shopping more convenient and efficient.

 

Sectoral Innovations

Indian GCCs are driving innovation across various sectors:

Automotive: Advanced Driver Assistance Systems (ADAS), Infotainment systems.

Semiconductors: AI accelerators, on chip memory.

Retail: AI based optimization.

Healthcare: Medical imaging, molecular testing.

Manufacturing: Smart factories, 3D printing.

Technologies like Cloud Computing, AI, Intelligent Automation, and Cybersecurity are impacting all sectors, positioning India as an innovation hub.

 

Talent and Ecosystem

India boasts over 180,000 AI/ML experts, a thriving AI startup landscape, and 600 dedicated AI researchers. Organizations need to focus on recruiting and retaining top talent, offering competitive compensation, and fostering growth friendly environments.

 

Strategic Considerations for Setting Up ER&D GCCs in India

1. Location Flexibility

Key Cities: Bengaluru (38% of total ER&D talent), Pune and Hyderabad (26% combined), National Capital Region (13%).

Tier II and Tier III Cities: Ahmedabad, Coimbatore, Thiruvananthapuram, and Vadodara contribute approximately 5% of India's ER&D talent.

2. Recruitment and Retention

Competition for talent is fierce. Companies should offer competitive compensation packages, career growth opportunities, and a supportive work environment to attract and retain top talent.

3. Government Support

India's government fosters innovation through initiatives like AI Centers of Excellence and national programs. Companies should engage with these initiatives and explore collaboration opportunities.

4. Agile Practices

Adopting agile development methodologies can accelerate product development and improve responsiveness to market demands.

5. Unique Value Propositions and Partnerships

Crafting unique value propositions and forming local partnerships with industry players and educational institutions can enhance innovation and growth.

6. Integration with Global Operations

Seamless integration between India based ER&D operations and global operations is crucial for multinational companies. Streamlined communication and project management processes ensure efficient coordination across regions.

7. Staying Updated with Regulatory Changes

Staying informed about regulatory changes, intellectual property protection, and compliance requirements is essential for companies operating in the ER&D sector.

 

Looking to the Future

As the ER&D GCC ecosystem in India continues to evolve, organizations must proactively address challenges like talent retention, evolving regulations, and market disruptions. By seizing opportunities in emerging technologies and fostering collaborations, India’s Digital Engineering landscape can ascend to become a global epicenter of innovation, driving groundbreaking advancements and economic growth.


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Founded in 2002, Zinnov is a leading global management consulting and strategy advisory firm, with a presence in 10 global locations. Over the last 22 years, Zinnov has partnered with Global Enterprises and Fortune 2000 companies across their value creation journeys to develop actionable insights – across revenue, talent, innovation, scale, and optimization. Zinnov enables companies to develop and optimize a global engineering footprint through center setups, technology and functional Centers of Excellence (COEs), portfolio optimization, partnerships, and real-time data/ insights – through its unique GCC Accelerator Platform (GAP) offering. This multi-lever approach helps Zinnov’s clients achieve higher R&D efficiencies, innovation, and productivity via an immersive and highly networked model. Zinnov’s expertise also includes advising global PE firms in asset shortlisting, target evaluation, due diligence, and value creation for their portfolio companies through a globalization lens.

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