'Our value proposition is that you can reduce the development time, you can have higher-quality products, you can try more ideas before you finalise prototypes. '

David Higbie, global director software, Ricardo, Inc, Thomas Fickenscher, global commercial manager, Ricardo Software, Shoreham Technical Center, UK, and Yogesh Umbarkar, general manager, Ricardo Software, India on driving a new business paradigm in India.

What are the challenges you currently face in selling your software to OEMs in an emerging market like India?
David: Our products are not cheap. These are high-value, high-cost software products which deliver a lot of benefits.
Our value proposition is that you can reduce the development time, you can have higher-quality products in the end, you can try more ideas before you finalise prototypes. But for clients to recognise these value propositions, they have to have a real need of these products. So is there a competitive pressure? Is there a legislative pressure? What is the pressure driving Indian OEMs or suppliers to be forced into innovating more rapidly or providing a higher quality product, that’s really where the challenge comes. The external pressures define a lot of internal policies and ways of executing the operations.

Yogesh: For example, emission norms in India are gradually becoming stricter, so obviously the OEMs cannot have a trial-and-error approach towards that. They have to use this combustion analysis tool to meet those requirements.
Convincing OEMs is not a problem. The issue is whether the OEMs have an immediate need of using this software or not. Mostly, all OEMs want to have the most sophisticated tools in their R&D setup but still parameters like budget, in-house engineering capabilities and highly skilled mechanical engineers who can make the best use of these software define the market scenario for us.

Are Indian OEMs more cost sensitive than their counterparts globally? Do you feel the cost pressures when you understand their requirements?
Thomas: Yes, that is definitely more in India than at any other place. We have highly skilled software professionals who are consistently working to upgrade our products. It’s not that we are selling the same products year after year.

David: Let me give you an example. We look at a company like Tata Motors, which has thousands of engineers working for them worldwide in the engine and vehicle design verticals. We know that our products can provide value to them and a company of that scale. However, we are not going to come with a unique pricing structure for this market; may be what we will do is provide more flexibility. With that we mean we will give our users what they really need from our software. So we may provide them with solutions which would have features suited to their needs.
Later, when the customers would grow more in terms of maturity and more sophisticated needs, they will start seeing the value and will ask for full-scale versions.
So we will not come with a different pricing scheme for this market as our costs for making the software are the same, regardless of who we are selling them to. But we will come up with more appropriate scalable solutions.

Going forward, will Ricardo focus more on a particular segment such as say passenger cars, or two-wheelers or commercial vehicles? Or will the company look at business across the entire vehicle segment?
Thomas: We will continue to look at everyone across the spectrum as the challenges and basic requirements are very similar. Our niche automotive engine or vehicle development applications are as suitable for cars as they are for two-wheelers or trucks and buses.

How do you plan to leverage your international relationships with global OEMs in India?
David: We have several key OEMs in our customer base; with some of them we actually have very close relationships in terms of developing new features and technology. A lot of those technologies used by the established western OEMs could be brought to India by them.
In our business, we keep developing new technologies through the help of our OEM partners, academic institutions and our own highly skilled officials and we share these technologies with every customer across the globe.

A number of global platforms are being developed by OEMs. There is a trend of major development and manufacturing operations being routed to developing nations like India, China, Brazil and others. Does that bring any change in the dynamics of a company like Ricardo?

David: I think this reinforces our strategy to have local support in terms of sales and commercial team in all the major markets. We have always been working with many customers, who are ‘global’ users. All of these clients have centralised functions in one country and we work for them accordingly.

What is the split in your automotive business?
David: Passenger car business is the number one segment for us. Number two and three would be very close in terms of business shares from two-wheelers and commercial vehicles.

Ricardo software such as Ignite is a multi-utility tool covering a lot of areas. Can you throw some light on how much time went into designing a solution like this for automotive OEMs?
David: This is a tricky question especially in the context of the development of Ignite, because it involves a legacy and expertise that went into the development of this software. Many man-hours went into defining those initial parameters. For example, we had a whole library of models per vehicle simulation like transmissions, gearboxes, tyres and others. Those things were developed over many years, tested and validated and we did a lot of unique re-coding.
So, in terms of content that has gone into the development of Ignite, it is very hard to measure. We had a team of, at an average including all the user interface developers, nearly 10-15 people who in a way worked continuously to develop Ignite over last 18-20 months. That is a significant investment for us.
AMIT PANDAY