Engineering-R&D beats business process management

BENGALURU: Engineering and R&D (ER&D) services and products are the fastest growing segments of the tech industry in India today. Together, they are also now bigger than the business process management (BPM) segment, prompting some to say it’s time to change the industry nomenclature from IT-BPM to IT-ER&D.
ER&D involves work that Indian third-party outsourcers do for the core products of their customers, and work that MNC captive centres in the country do for their parents’ core products.Bosch engineers in India work on development of products such as driver assistance, safety, and anti-lock braking systems. Intel engineers work in core areas like graphics, artificial intelligence and 5G, and Samsung in 4G, 5G and mobile camera image processing software.
ER&D services and products constituted $36 billion of the total revenue of $177 billion of the Indian tech sector in 2018-19, according to a report by Nasscom and consulting firm Zinnov. BPM revenue was at $35 billion (see graphic). Zinnov CEO Pari Natarajan said it was time the industry nomenclature was changed to IT-ER&D.

Sivaram S, engagement manager at Zinnov, said that about $18 billion of the ER&D revenue came from the 1,567 global competence centres (or MNC captive centres) in India, and about $14.5 billion from Indian service providers like TCS, Infosys and Wipro. The remaining are product revenue.
The report said global R&D spends grew significantly (about 11%) in 2018 across industries to $1.8 trillion, as companies tried to use newage digital technologies to improve operations and increase customer engagement.
About 5% of R&D is globally sourced, and India is the biggest beneficiary of that, accounting for 30% of the total in 2018, up from 28% in 2017. Compared to the $18 billion of work that MNC tech centres in India do, it’s $12.5 billion in China. While Indian talent is good in a variety of areas, especially software, Chinese talent is particularly good in areas that require hardware-software integration, Sivaram said.
R&D spend in automotive is focused on electronics, software and autonomous vehicles; semiconductor firms are focused on AI, IoT and cloud; healthcare firms in personalised medicine, AI in drug discovery; consumer electronics in connected and smart devices; industrial in predictive asset maintenance; aerospace in predictive maintenance and in-flight connectivity; banking/insurance in payments technology and telematics based insurance; and retail in transformation of instore shopping.
Even Indian service providers are winning large deals.