Engineering R&D services market a US$ 45 billion opportunity by 2020: NASSCOM

The two-day Engineering Summit 2012 held in Pune debated the ER&D services market, the challenges and the possible solutions.

October 2, 2012: The software industry body, National Association of Software and Services Companies (Nasscom) organised a two-day conference, ‘Engineering Summit 2012’ in Pune on September 28-29. The agenda was to debate the increasing importance of the engineering services and associated challenges and solutions in key verticals including automotive, construction equipment, heavy machinery, robotics and others.

According to a recent study done by the management consulting firm Zinnov, the engineering research and development market in India will grow at a CAGR of 14 percent to become a US$ 37-42 billion opportunity by 2020 as against the current annual size of US$ 14.7 billion. Further, the report highlights that the market space will also generate an additional employment of over one million jobs. Crediting the ER&D services industry for establishing India as a design and innovation hub globally, the speakers at the event underlined the availability of a massive talent pool, low cost manpower and resources, alternate methods of manufacturing and frugal engineering approach, flexible business models and several other factors.

Engineering services and their impact on the automotive domain

Engineering is perceived as the science that helps improve the way in which products are manufactured. According to Timothy Leverton, chief of Tata Motors’ R&D, around 2.2 million fresh engineers graduate out of colleges every year in India as against less than 50,000 new engineers passing out every year in the UK.

Standing with an advantage of a massive talent pool, India is gradually taking the centre-stage with fresh ideas being implemented at various engineering processes, thereby bringing the concept of ‘frugal engineering’ into the picture. The term as was originally coined in 2006 by Renault chief, Carlos Ghosn, comprises of a core principle of eliminating the non-essential features from the final product and thereby reducing the costs and efforts with low cost design, manufacturing simplicity, and enabling greater efficiencies in product development, capital and overall operations.

India is fast becoming the global hub for frugal innovation and engineering as Indians are known to be sensitive to a low-resource environment. The speakers at the event jointly suggested that India should encourage investments in value creation in product development and alternate business models and believe that the Indian relevance is heading beyond the cost arbitrage to substantial strategic engagement for global OEMs.

Recent times have witnessed the global manufacturers investing in India setting up their engineering research and development centres for longer term benefits despite the ongoing economic turmoil worldwide. Besides the ever rising local demand seen across the country, the Indian footprints of global automotive manufacturers are also contributing to the product development of vehicles for worldwide applications. To maintain the growth rate of investments in India in the engineering services space, Ravi Pandit, chairman and group CEO, KPIT Cummins, who foresees a sea of opportunities in the automotive domain, mentioned that “the industry needs to drive the concerted initiatives to further strengthen the innovation capacity and research capabilities through specific domain focus and by encouraging R&D collaborations.”

The challenges and recommendations

The biggest roadblocks are the readiness of the available talent pool to tap the growing opportunity and lack of a formal innovation policy. The summit recommended the development of high-calibre engineers by incorporating relevant research aptitude from educational and training perspectives and hence building a substantial talent ecosystem. The discussions also highlighted the need to sustain the cost competitiveness and to bridge the gap between the engineering services and quality manufacturing practices, and called for a collaborative approach to lay down a formal innovation policy.

Construction Equipment and Heavy Engineering Industry

The NASSCOM conference also formed a special interest group (SIG) focussed at the C&HE industry which will work in the areas of policy framework for the industry, building the talent ecosystem, ensuring advanced technologies in product innovation and address the domain-specific regulatory challenges.

The session was chaired by Samir Yajnik, president global services and COO Asia-Pacific, Tata Technologies. He said that “while the industry has been registering strong growth and India is set to outpace the global growth average, there are challenges which need to be addressed proactively. The C&HE – SIG will be an idea network for stakeholders to innovate and work towards a common agenda keeping India’s global predominance in this sector as the focal objective.”

According to Zinnov, North America and Europe still account for a major portion of the global R&D spend with 35 percent and 32 percent respectively.

AMIT PANDAY