Reaching the Inflection Point?

NASSCOM ER&D Report 2014

Strategy&

Booz & Company is now Strategy&

2

Scale, quality prominence,

and deep relationships,

skills, and insight

Global strategy model, leading

foresight, capabilities positioning

Our Vision

The pre-eminent strategy through execution firm that delivers superior value, offers premium

talent, and is differentiated by its ability to help

clients build their own capabilities on a global

scale.

Strategy& Vision

Strategy& 3

Over last 8 years, we have collaborated with NASSCOM on the ER&D study

2006“Globalization of

Engineering Services”

2014“Reaching the

inflection point?”

2010“Accelerating

Innovation with Indian Engineering”

2012“India’s Maturing

Ecosystem”

Source: NASSCOM, Strategy&

Strategy& 4

Global ER&D spend will grow to US$ 1.6 - 1.7 Tn by 2020

Share of Global ER&D Spend

32%

19%

49%

18%

51%

30%

Total: US$ 1.6 - 1.7 Trillion

Source: Literature review, Strategy& Innovation 2000 database, Strategy& IC, Strategy& analysis

Total: US$ ~1.400 Trillion

Corporate ER&D (Others)

Corporate ER&D (Top 2000 Companies)

Government ER&D

2012-13 2020

Strategy& 5

Corporate ER&D spend will cross $850 Bn in same period

5% 7%

7%

11%

3%3%

16%

39%

1%1%4%

3%41%

3%

0%1%

3%

16%

4%5% 6%

6%

11%

3%

Total: US$ 850-900 BillionTotal: US$ ~700 Billion

Global Corporate ER&D Spend by Verticals

Others

Industrial Automation

Medical Devices

Energy

Construction

Machinery

Computing Systems

Telecommunications

Semiconductors

Consumer Electronics

Aerospace

Automotive

Source: Literature review, Strategy& Innovation 2000 database, Strategy& IC, Strategy& analysis

2012-13 2020

Strategy& 6

US and Europe are major geographies; Asia will grow fastest

21%

29%

38%

2%

0.4%6%

4%

16%

20%23%

2%2%

8%

29%

Global Corporate ER&D Spend by Geography

Source: Literature review, Strategy& Innovation 2000 database, Strategy& IC, Strategy& analysis

China

Japan

Europe

India

RoW

Rest of Asia

US

Asia Total

2012-13 2020

Total: US$ 850-900 BillionTotal: US$ ~700 Billion

Strategy& 7

Six key trends will drive ER&D spend globally

ER&DThemes

Connectivity

Digital Engineering

Sustainability

Miniaturization

Localization

Software-led Differentiation

Source: 2014 ER&D demand and supply s interviews, Strategy& IC and analysis

Key ER&D Themes

• Connected Cars• Connected Flights• Connected Medical

Devices

• Design Virtualization

• Concurrent Engineering

• Simulation-based Testing

• Fuel Efficiency• Advanced Materials

(Composites)• Alternate Fuels

• Intelligent Cars• Digital Oil-fields• Smart Engines• In-flight Entertainment

• Localized Automobiles

• Localized Consumer Electronics

• Miniaturized Inverters• Wearable Medical devices• Smaller CNG

compression units

Strategy& 8

Propensity to offshore is increasing

Propensity to Offshore – Product Development Value Chain

Source: 2014 ER&D demand side survey and interviews, Strategy& analysis

Post Introduction

ProductionTesting and Validation

PrototypingDetailed Engineering

Concept Development

Pro

pen

sity

to

Off

sho

re

Low

High

+32%

+86%

+58%

+28%+33%

+24%Current (2014)

Future (2020)

Strategy& 9

India can capture a third of the market

76%

24%

69%

31%

2012-13 2020

Total: US$ 100-110 BillionTotal: US$ ~63 Billion

RoW

India

Global ER&D Offshoring Market

Source: Strategy& demand side interviews, Strategy& IC and analysis

Strategy& 10

India continues to be a preferred offshoring destination

Country Preference for Offshoring Engineering Services

Source: 2014 ER&D demand side survey and interviews, Strategy& IC and analysis

• High preference

• Low preference

Strategy& 11

Outsourcers see positives with Indian services providers

Source: 2014 ER&D demand side survey and interviews, Strategy& IC and analysis

Areas of improvementKey Positives

Scalability of resources

Cost effectiveness

Greater maturity in offshoring

Senior leadership engagement

Design capabilities

Program management

Quality and reliability

Innovative approach to solutions

Prototyping capabilities

Strategy& 12

Focus on enhancing capabilities while promoting India as the ‘go-to’ ER&D destination will hold the key to the future

Call to Action for India ER&D Industry Growth

Source: Strategy& analysis

Po

sit

ion

ing B

us

ine

ss

E

nv

iron

me

nt

Capability

A Capability Development

• Digital engineering hub • Hardware capabilities• Deployable technical talent • Acquisitions and expert hiring

Enhanced Profile

• Evolved value proposition• Globally recognized accreditations• Global footprint and strategic

partnerships

Attractive Business Environment• Investor friendly policies• Govt. funded research programs• Industry academia collaboration

B

C