India emerges ahead in Zinnov’s global R&D service provider ratings

BANGALORE, INDIA: Zinnov Management Consulting today announced its Global R&D Service Providers (GSPR) Rating 2013. The Indian service providers have clearly emerged as the leaders and soon India will have a $1 Billion Product Engineering Services player in the market.

TCS has the most expansive service offering across all the verticals. Wipro and HCL being heritage engineering and R&D service providers, they have deep and strong capabilities in this space.

Tech Mahindra has emerged as a strong player in this segment. Infosys is strengthening and growing its presence in areas like semiconductor and electronics and notably its strong training engine for Engineering R&D gives it a definite edge.

Overall from an operations perspective, attrition has remained stable at around 14 per cent in this segment and the companies have been able to sustain the pricing pressures and retain the billing rates.

There has been a significant uptake in terms of alternate pricing models like risk reward and revenue share and the service providers are now proactively approaching customers with these new business models.

Since the last year, the service providers have significantly invested in lab infrastructure; the Indian service providers alone have invested over $25 Million in lab infrastructure.

Niche service providers have a better focus on the non-linear strategy and are beginning to see good traction in terms of the revenue from non-linear strategies.

More than 30 per cent of the overall deals signed in the engineering services segment have had a solution component incorporated in it and clearly there is a clear shift from the traditional professional services model to a solution augmented model.

The European service providers in the product engineering space like Capgemini, Altran, Safran, Alten, AS System are now starting to leverage the Global Delivery Model and this trend will soon put tremendous pressure on the India centric service providers who have long enjoyed the labor arbitrage.

The Indian engineering services segment witnessed fewer M&A activity as compared to the global marketplace.

It is expected that global companies will spend over $27 Billion on Engineering Analytics and the addressable opportunity for service providers is quite sizable.

Key Findings of the Study

Overall R&D spending by companies across the world continues to grow at a brisk rate. Top 500 R&D spenders alone have invested close to about $560 Billion in R&D

R&D globalization continues to be on the rise and India and China are garnering a major share of the engineering services revenues; Over 225 new R&D centers were set up in India in the last five years

Indian service providers continue to retain the lion's share of the overall Engineering and R&D outsourcing pie - accounting for about 23 per cent of the overall market

Currently the total exports in the Engineering R&D outsourcing segment from India stood at $16.3 Billion. However, the growth in the Engineering R&D and outsourcing segment lagged the overall Indian industry growth rate and stood at 10.9 per cent

Engineering analytics is a significant opportunity area, with overall spending in this segment set to increase to about $27 Billion by 2017 at the rate of 16.5 per cent