India’s R&D globalization and services market to double by 2020: Zinnov

Zinnov Management Consulting has launched its much-awaited rating of Global R&D Service Providers across geographies. The study titled “Global R&D Service Providers (GSPR) Rating 2014”  is an annual study to assist business leaders spearheading global engineering initiatives make right decisions in partner selection across geographies.

The study estimates the overall addressable R&D globalization and services opportunity at $170 billion as of 2014. Currently, only $55 billion of this opportunity is addressed globally. India’s share of the addressed market is 33% with in-house R&D centres contributing $11.3 billion worth of services to their parent companies.

The study finds that the Engineering services landscape is undergoing rapid shifts from the perspective of range and nature of services. The global outsourced Engineering services market currently stands at $26 billion with players from the US, Europe and India having an almost equal share. Indian service providers lead the pack amongst the global service providers. As of 2014, the Indian service providers deliver $6.9 billion worth of services which is 27% of the addressed outsourced services market. The study estimates that by 2020 the Indian outsourced ER&D services market will reach $15 billion growing at a CAGR of 13%. This growth will be primarily driven by addressing the increasing demand for embedded systems and software needs across all verticals.

Zinnov’s annual Global Service Provider Rating is an exhaustive exercise that covers over 50 companies in the ER&D space.

Amongst global leaders in Engineering and R&D services, Wipro, TCS and HCL continue to retain their dominant position in the Engineering services segment. However, the leaders like Infosys, Tech Mahindra, L&T TS, Cyient, Symphony Teleca, Aricent, IGATE and MindTree are fast closing the gap by diversifying into newer verticals by leveraging their embedded and software capabilities and exploring newer customer segments like first-time outsourcers and growth stage start-ups. Deep solution capability and better IoT readiness differentiates these companies from the rest.

Niche engineering service provider category is where the Indian service providers face stiff competition from the Chinese and Central and Eastern European players. Pactera is, undoubtedly, the leading Chinese service provider in the Engineering services space, while EPAM is the leader in Central and Eastern Europe. Ness and GlobalLogic also have a good presence in Eastern Europe and have leadership capabilities the software product segment.

Transforming from being a proverbial service provider to a true engineering partner is the key challenge facing the engineering service providers. To overcome this challenge, service providers are putting together structured engagement models to collaborate with start-ups and expanding their ecosystem partnerships with OEMs and technology partners.