India accounts for $12.3 billion, or 40 per cent of the total of $31 billion of globalised engineering and R&D in 2015, as per a study conducted by consulting firm Zinnov. Compared to last year, the revenues of the captives in India grew by 8.3 per cent, as against the growth of 7.6 per cent for all captives. China comes second with revenues of $9.7 billion.
Zinnov, which has been focused on this space since it was founded over a decade ago, finds that 69 per cent of all new offshore technology centres this year was set up in India. The past two years have seen a spate of new centres being set up and the older ones expanding, including those of Exxon Mobil, Lowe's, Visa, Victoria's Secret, JC Penny, CME Group, Wells Fargo, and British Telecom. Software & internet accounts for 35 per cent of the work being done in the captives, telecom & networking follows with 14 per cent and semiconductors 12 per cent. Consumer electronics, automotive, computer peripherals, medical devices, industrial, and aerospace & defence are other areas of work. Zinnov finds another interesting trend: engineering and R&D outsourcing to third parties is beginning to outpace growth of captives in India. India is the second biggest outsourcing destination, after Western Europe, where companies like Altran, Alten, Akka Technologies, Assystem and Harman Connected Services are strong.
Independent software vendors, and telecom outsourcers dominated the outsourced pie. But the fastest growth came in the automotive, software and medical segments, the first thanks to the trend towards connected cars and change in labour laws in Germany. TCS, Wipro and HCL Technologies have traditionally been the leading players in this space. “However, Infosys, Tech Mahindra, L&T and Aricent are giving good competition to the top 3. Even European players like Altran and Alten are setting up centres in India,” Sidhant Rastogi, partner in Zinnov, said.
Total R&D spending by the top 500 R&D spenders in the world grew by 2% to reach $614 billion this year. That means, globalized and outsourced R&D together ($67 billion) accounts for 11% of total R&D.
Rastogi said the outsourced R&D space was seeing a huge acquisition trend. Aricent acquired SmartPlay to get embedded and semiconductor competency, Altran acquired Nspyr and Sicontech to grow in the US market, Quest Global acquired Nest to diversify in embedded software services, Capgemini and Harman entered the product engineering services market through acquisition of mid-sized engineering firms. “No one has grown more than 13% without acquisitions. So Indian players will have to acquire to grow faster,” Rastogi said.
