Beyond Offshore ‘A New Vision of India: a Partner for

BeyondBeyond OffshoreOffshore‘‘A New Vision of India: a Partner for InnovationA New Vision of India: a Partner for Innovation’’

PRESENTATION TO CONFINDUSTRIA September 14, 2005

© Copyright G2i - 2005- 1 -

WHO ARE WE?

Sanjeev Rao

• French and Indian dual nationality

• 3 year strategic experience with BCG in Paris

• 9 year operational experience in lndia, France, UK and Italy

- R&D, International project management, business development

• Insead MBA with an Electronics/Telecom degree from India

Jean François Lengelle

• French-Filipino• 5 year strategic experience

with BCG in Paris, Milan, London, and Barcelona

• 3 year operational experience in Germany and the UK as financial controller

• BFA at HEC Paris


INDIA : A COUNTRY OF CONTRASTS

...However India is now known as the new silicon valley !

Moghul monuments…

or colorfoul religiousfestivals…

or Impressive Hindutemples…

Spirituality… Or Bollywood

cinema…

Or Food…

…or a colourfulbride ?

Unless you have visions of Mountains… Or Beaches...

India conjures up several traditional images…

Source: EVS-G2i research, newsflows


INDIA: FACTSHEET

2.1%

24,400

7.6

Euro

2,501

0.3%

311

2.0%

Europe

2 x

~1/8

0.4 x

1€ = Rs.57.9

1.3 x

4.7 x

~3.5 x

~3x

Ratio (I/E)

~2 x

~1/9

2 x

11 x

20 x

~19 x

~5x

Ratio (I/I)

2.3%4.2%Inflation (consumer price)

27,7003,100GDP per head at PPP ($)

1.6 3.3 GDP at PPP ($ trillion)

EuroRupeeCurrency

3013,290Land area ('000 sq km)

0.07%1.4%Population growth

581,080Population

1.3%6.2%GDP Growth (real)

ItalyIndia

Note: Europe defined as Euro-zoneSource: CIA Fact-book, OECD, ECB, G2i Analysis, latest estimates available (2004 or 2005 est.), unless specificied


INDIA: AN IT ENABLED SUCCESS WELL KNOWNCost-Arbitrage Being the Main Driver

7.1

9.2

12

15

2002-03 2003-04 2004-05 2005-06 E

IT : a success already established(Software and Services Exports)

The converging point for traditional BPO

(IT Enabled Services-BPO Exports)

M$Bio$

Productivity, quality and value-added at a fraction of the traditional costsIndians ‘happy’ to work in ‘Call-center’

Sources: Nasscom report, G2i analysis

0.2

3.65.2

7.3

2002-03 2003-04 2004-05 2005-06 E


INDIA IS WAKING UP, …Moving Beyond Cost-Arbitrage

A domestic market growing

A sustainable demographic advantage• 200 millions consumers in the « middle class »• 60% of the population less than 25 years of age• 8% annual GDP growth, 11% in the Q4 2003

A policy towards infrastructure improvement• 15Mds USD$ from the government, and private

A stable and favourable environment for the development ofbusiness

• Modern financial and monetary system• The most important democracy in the world

First results of direct investments very positive• 61% of the 385 investments operating in India, have

achieved break even(1) in 2003

Mobile market booming• 48 million users, growth at 2.5 million users per month• Growth of 160% in mobile and 139% in non voice

services (today contributing only 4.7% of revenues)

Skilful resources

India’s competitive edge is its skilled manpower• Over 380 universities (11200 colleges)• 1500 research institutions• Over 200,000 engineering graduates• Over 300,000 post graduates from non engineering

colleges

2,100,000 other graduates• Around 9,000 PhDs

An advantage well-captured by the US• 36% of NASA researchers are Indians• 28% of IBM employees are Indians• 12% of US scientists are Indians

(1) Study of the FICCI (Federation of Indian Chambers of Commerce and Industry)Source : Gartner 2004 ; IDC 2004; SEC filings ; Press search ; G2I analysis, Ministry of IT and Telecommunications


… IN SPITE OF SOME REMAINING DISADVANTAGES

Population growth

Illiteracy/poverty

Improvements needed to infrastructure (roads, waterways etc..)

Perceived regional instability

International financing increasing but not sufficient (more emphasis on China)

Uneven ‘income distribution’


OPPORTUNITIES FOR ACTIONS FOR ITALIAN COMPANIES

India as a domestic market

Transport infrastructures

Water treatment and distribution

Consumer goods

Information technologies

Pharmaceuticals and biotechnologies

Defense and space technologies

IT outsourcing or ITO

Application maintenance

Application takeover

Data cleaning

Migration

Application implementation

E-commerce

Web-design

Knowledge and Business Processes

(KPO/BPO(1))Information services ( market analysis, data-mining, ...)

Engineering Services

HR/payroll

Finance

Purchasing

(1) Business Process Outsourcing


INDIA VALUE PROPOSITION IN INNOVATION

~100 MNCs with R&D centers in India~70% set up within the last 5 yearsConcentration in : Hardware, automotive, pharmaceuticals, Industrial and Medical Equipments, Semi-conductors, aerospace, consumer electronics, etc, Activities that cover both product R&D and client projects

Brain-drain starting to revertAlthough 12% of US scientists are Indians, several Indians are transferring backE. g. the head of Microsoft India research lab, P. Anandan (worked in computer vision/video analysis, native of Chennai, India, Microsoft Research's Redmond lab for the past seven years)

Arising sources of innovation in Food and agriculture, Healthcare, Alternate Energy, … with innovative products and/or processes

Source: Press; Interviews, EVS-G2I analysis


R&D INVESTMENT IN INDIA EXPECTED AT 7.2 Bn USD

R&D Investment in India

2.23.2

7.2

1997 2002 2007 expected

R&D investment in India has grown at a CAGR(1) of 7.4% over 1997-2002

Expected to be 18.0% over 2002-2007

Not only the big companies, many IT startups have their backend R&D centers in India

Ex.: July Systems, Hellosoft, iPolicy Networks

Many small biotechs. are providing contract research services from India

Ex. : Quintile-India, Lambda, Lotus, Sygene, Metahelix Life Sciences

(1) Compounded Annual Growth RateSource: EVS-G2i analysis and data from Financial Express and Business Today

‘Over 4000 patents in five years, over 100 top MNC and Indian Research Laboratories, the second most entrepreneurial culture…are just some of the reasons that make India an ideas superpower’

-Business Today, January 18, 2004

Bio$

© Copyright G2i - 2005- 10 -

R&D break-up per sector Emerging trends

R&D MAINLY IN THE GOVERNMENT / PSU SECTOR (~70%)But private sector R&D is growing

The government accounts for ~all of the investment in defence, agriculture, space and infrastructure

‘Core research’ is dominated by the government for historical reasons

Key growth areas in MNC R&D:ITTelecommunicationsChemicals and PharmaceuticalsConsumer DurablesAutomotive

Key new areas: Biotechnology and Basic Pharmaceuticals research

Defence18%

Agri17%

Industrial14%

Energy8%

Space13%

Health8%

Infra8%

Other14%

100% = USD 2.2 billion

Source: EVS-G2i analysis of data from Vigyan.org (2004)

© Copyright G2i - 2005- 11 -

IP ENVIRONMENT BECOMING HEALTHIER

62818399

211285 338

883

1700

1997 1998 1999 2000 2001 2002 2003

Actual Estimates

Source: EVS-G2i analysis

1,008 patents per million of Japanese population, 622 in the USA vs. 0.9 in India• However, the growth from 1997 to 2003, emphases the emergence of a healthy IP environment and

confidence in the government’s ability to protect IP rights

2001Beginning with 5 Indian employees Main areas of operation: Patent application drafting and filing with USPTO and EPO

2005~100 IP professionals having cleared the Indian Patent Agent Exam (lawyers, engineers, bioscientists, medical doctors, and others)500th patent application written by July 2005Global-compliant operating/confidentiality processes

• Customers in the UK, Europe and the USExpertise in IT/Telecom/High Tech, HC, Chemicals/ Pharma

• Patentability/technology assessment• Patent application drafting• IP asset management services• Commercialisation studies

Filling by Indian Assignees IncreasingIndian IP services providers

educating the market (illustration of Evalueserve)

© Copyright G2i - 2005- 12 -

ITALY CAN LEVERAGE INDIAN SOURCES OF INNOVATION IN SEVERAL AREAS OF ENGINEERING SERVICES

Process controlMonitoring and control sub systemsSystem design automation toolEmbedded softwareCommunication protocolsSCADA, Web based SCADA

Industrial AutomationExpert SystemsAlgorithms, Modeling SchedulingDevice interfacesData management / ERPGUI DevelopmentSecurity servicesConvergence technologies : interfaces, middleware, applications levels

TestingDomainTest EquipmentsSoftware TechnologiesHardware testing

Embedded systemsIndustrial

• Single Loop Controllers• RTUs - Distributed I/O• In-Vehicle Electronics

Networking/Telecom• Routing Protocols, Bluetooth, 802.11b

Broadband• RF Modems• RF Transponders

Data Security• Encryption and Decryption• Firmware, Drivers

Bus Standards• Firmware and Driver

Established Industry Standards Compliance

FDA Regulations Compliance

GISData conversion and creationApplication developmentConsultancy

© Copyright G2i - 2005- 13 -

HEALTHCARE/BIOTECH OFFERING A KNOWN AND SUSTAINABLE SOURCE

R&D~ 50 Biotech PCT Patents have been filed in India~ 20 r-DNA product clinical trials are on-going in India~ 10 r-DNA products have been approved in India

Manufacturing~6 r-DNA products being manufactured in India (Hep B, Interferon, GCSF, EPO, SK, BT cotton) ~6 companies manufacturing recombinant vaccinesThere are 2 companies that will manufacture r-Human Insulin

~25 companies marketing Biotech products

0

10

20

30

40

50

60

70

80

1996 1997 1998 1999 2000 2001 20022

2.2

2.4

2.6

2.8

3

3.2

3.4

Capital R&D Expenditure

Recurring R&D Expenditure

Recurring R&D Expenditure/Sales

Sustainable(Evolution of Top 10 Indian Companies R&D Budget)

Source: EVS-G2i analysis, Ernst&Young, IBEF Report

Existing Capabilities

© Copyright G2i - 2005- 14 -

OTHER EMERGING INNOVATIVE COMPANIES/CONCEPTS‘Platforms for an Innovative Growth’

Knowledge Process Outsourcing ‘KPO’

Integrated Energy Management

Innovation type

Creating, Structuring, Storing, Synthesizing, Protecting and Monetizing KnowledgeRequires significant domain expertise

Responding to electricity scarcity End-to-end solutions to reduce energy consumption

Bye-product when the coconut husk is defibered100% organic natural and root friendly productSubstitute to Peatmoss

Shift from execution of ‘standardized processes’ to carrying out ‘complex processes’Demand advanced analytical and technical skills as well as decisive judgment

Integration of technical acumen with practical methods to audit, detect and controlMore efficient/reliable energy saving systems, lower down-time, and enhance productivity

Good water retention property to soil (5 x times) Increased soil aerationEnhanced soil wettingActs as a solid potting medium and substratum for plants

Description Innovation rationale Examples ofPlayers

Evalueserve

Conzerv

CocotechnologiesCocotechnologies

Services

Industrial

Agricultural

Source: G2i analysis, newsflows, companies interviews

© Copyright G2i - 2005- 15 -

SOME POINTERS THAT COULD BE USEFUL IN DOING BUSINESS WITH INDIA

Cultural differences should not be ignored especially between Continental Europe and India

On the ground business can be quite different

Business is often based on relationships and getting confidence at a personal level

Do not forget the diversity in Indias unity

© Copyright G2i - 2005- 16 -

G2i : YOUR PARTNER FOR SUCCESS IN INDIAHelp Italian Decision Makers Leverage the India Advantage at Minimal Risk

GrowthIndia Entry Support

Sources of Innovation

1 2

• Understanding the India opportunity

• Overcoming cross cultural barriers

• European front end• Operation Team on the

ground in India• Business development• Project initiation

Coaching on India3

• Indo-European team based in Europe and Bangalore• Deep Knowledge of both European and Indian business cultures• Firepower of ~200 analysts specialized in business intelligence on India• Expertise in international project management, strategic/operational issues• An advisory committee of business leaders from Europe and India

© Copyright G2i - 2005- 17 -

Sanjeev [email protected]

+33 6 79 32 10 41

Jean F. [email protected]

+33 6 17 81 32 72

Websiteg2i-group.com

GRAZIE MILLE !!!!!

Documents

Beyond Offshore ‘A New Vision of India: a Partner for