Engineering Research and Design (ER&D) services market will be the next growth engine for the Indian IT-BPO industry and India has the potential to capture USD 40-45 billion in ER&D services by 2020, according to a National Association of aSoftware and Service Companies (Nasscom) estimate.

As per Nasscom’s report on ‘Global ER&D: Accelerating Innovation with Indian Engineering’, engineering services landscape in India has evolved significantly over the last four years, reflecting maturity, diversification and enhanced verticalization to partner with global corporations.

The Indian ER&D market in 2009 is estimated at USD 8.3 billion with employee strength of 150,000, reflecting almost a threefold growth in revenues, employees and number of offshore development centers. This is expected to grow further with the global ER&D spend surpassing USD 1 trillion in 2009 and expected to touch USD 1.4 trillion by 2020.

Speaking on the launch of the report in Bangalore, Som Mittal, president, Nasscom, said, “India is now an epicenter for global ER&D services with a compelling value proposition, based upon the growing depth and breadth of services, flexible business models, large engineering base and global footprint with greater proximity to customers."

"We are in a creative profession continuously expanding our portfolio from 'art to part' – covering the full spectrum of product development value chain. We are using our strengths by going beyond redesigning products to reengineer the production processes and business models to meet the needs of the domestic market.”

The major growth drivers include continued ER&D investment critical for innovation and penetrating new markets; increasing use of electronics, fuel efficiency/ alternate fuels and convergence of technologies; greater focus on emerging markets; increasing sophistication and maturity of the ER&D services industry. Changing customer perceptions is also another major growth driver wherein India is being viewed as a strategic partner focused on innovation rather than just sustenance engineering.

As per the report, at the product development level, strong capabilities exist in India in areas of automotive interiors and exteriors, aero-structures and propulsion in aerospace, access networks, core networks, devices in telecom and development of small-medium size products in the construction/heavy machinery vertical.

However the report reiterates that collaborative stakeholder action would be an imperative to achieve USD 40-45 billion industry in 2020. Focused investments are required to capture new markets, deepen capabilities within verticals and build services portfolio across the product development value chain.

The Indian market, dominated by the government, and a lower propensity to outsource would require a different ‘go-to-market’ strategy. The priority action that needs to be focused upon immediately is to build complete product development ecosystem while highlighting Indian engineering capabilities to the world.