Zinnov Management Consulting, a leading Globalization and Market Expansion Advisory firm, released its much awaited study titled, “Engineering R&D: Advantage India” , a detailed work  on the fast-growing Engineering R&D and Product Engineering Services segment in India, which  today, is the leading offshore destination in delivering engineering R&D services with a 22% market share. The launched study brought to light that the market in India is expected to grow at a 14% CAGR from US$14.7bn in FY2012 to US$42bn by 2020 and is  also expected to outpace the IT growth rate in India.
 
Globally, organizations are again focusing on R&D, after a period of lull owing to factors such as the economic crisis, natural disasters in Japan, etc.  While North America and Europe still account for a major portion of R&D spend with 35% and 32% respectively, it read that the share of emerging geographies is witnessing a substantial growth rate of about 16%. The study says that the ISV segment in FY2012 has contributed most significantly to R&D from North America with 35% share, while the Automotive sector spend dominated R&D investments in Europe and Japan, with 54% and 49% share, respectively.
 
Speaking about the report, Pari Natarajan, Chief Executive Officer, Zinnov said, “There has been significant activity in the Indian captive landscape in FY2012, with presence of 874 centers as compared to 836 in FY2011 and the determining factor for this is that strong focus on emerging nations as target markets across major verticals”.
 
For instance, while Europe and North America are currently the leading markets in Aerospace , this is likely to  change significantly by 2030, with countries outside these regions expected to own about half the commercial aircraft in service. Even in the Telecom sector for that matter, deregulation in India and China is fueling the future growth prospects of the industry. Similarly, in the Medical Devices and Consumer Electronics segments, markets like India and China are expected to lead the consumption.
 
Automotive, Healthcare and Industrial verticals are hot sectors that are poised for growth globally and are correspondingly expected to drive future MNC captive center growth in India. The study also read that the MNC Captive centers are also growing in maturity, with many companies starting their core research teams operating from India.
 
While MNC captives today drive the Indian Product Engineering growth story in almost all verticals except Aerospace where service providers have a 76% share, Service Providers are upping their game and in fact grew faster in FY2012, at 16% CAGR compared to 11% growth for Captives. The launched study said that the Service Providers are strengthening their deep expertise in Software Product and Embedded development, which have applications across verticals. They are also increasingly innovating in products and platforms, working closely with the ecosystem by engaging startups, universities, global development forums and MNC captives, increasing investment in domain/vertical-specific infrastructure and talent, as well as partnering with MNCs in their go-to-market strategy. On the other hand, while Engineering for Telecom and ISVs continue to be the mainstays of the Indian Service Provider landscape, their growth is outpaced by emerging verticals such as Medical Devices with 26% growth and Automotive with 17% growth.
 
Commenting on the study, Sundararaman Viswanathan, Manager-Consulting, Zinnov, said, “India is well-poised to contribute to Global ER&D as the ecosystem of captive centers, service providers and startups, increasingly work together to drive innovation. As relationships mature, service providers and customers will enter into pricing models based on market outcomes. Further, with emerging nations growing in importance as key markets, MNCs are set to leverage the inherent competencies in India to build products for local and global markets.”
 
Last but not the least, the Zinnov study read that Service Providers are increasingly leveraging new opportunities created by Cloud, Enterprise Mobility, New Media and Entertainment. Additionally, as a part of Zinnov’s Global Ranking of R&D Service Providers, it evaluated competencies of various players across geographies and found out that HCL and Wipro are leaders in both the Enterprise Mobility and Cloud segments, wheras Cybage is emerging as one of the strong and niche players in New Media and Entertainment segment.