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