L&T Technology Services Takes The Lead In A Tech Driven India
The collaborative approach also includes the government and similar authorities. L&T Technology Services has become a strategic partner in the IoT CoE for start-ups and is leading the initiative created by NASSCOM in association with the Indian government
The opportunities galore for tech companies, especially with the advent of Prime Minister Narendra Modi's vision to make Digital India and Make in India a success, are unprecedented. Connecting 1.2 billion people through technology and enabling quality healthcare, security and information requires a world class engineering framework on which smart cities equipped with the latest digital technology can flourish. As engineering firms gear up to make the PM's vision a reality, L&T Technology Services is taking a lead in this endeavour.
Engineering Services Outsourcing (ESO) out of India is no longer niche. It has the potential to be the biggest growth driver for the technology outsourcing industry and be a key player in the digital nation drive. India has capitalized on the IT boom for last 15-18 years and this trend has now matured.
"The addressable market for global ESO domain is expected to grow to $215 billion to $300 billion by 2020. L&T Technology Services is already the number one pure play engineering service provider in India and it is rated in the leadership zone across eight verticals and two horizontals thus validating dominant position," says Dr Keshab Panda, Managing Director and Chief Executive Officer of L&T Technology Services, highlighting the opportunity at hand. He explains that the Engineering R&D service market is opening up at this point of time and there lies a huge potential to tap this market especially in the Embedded and Software services domains.
L&T Technology Services is already making big bets with this in mind. "We are making the right moves to capitalize on this fast growing market for services industry with a multi-pronged vertical strategy. We are betting high on digital engineering, especially smart technologies such as Internet of Things (IoT) for Smart Manufacturing and Industries 4.0 with focus on fast growing verticals like automotive, medical, industrial among others," he says.
Collaboration Meets Disruption
While L&T Technology Services is approaching the global opportunity in multiple ways, the road ahead is of collaboration between all stakeholders. L&T Technology Services believes that IoT's true value will unlock if innovators, vendors and enterprise customers join hands. The company has increased its digital engineering offerings through partnerships and alliances with global companies including Cisco, Intel and Sierra Wireless to create new machine to machine (M2M) and IoT solutions that can change the world. Its innovation engine has co-authored over 240 patents with customers and has also partnered with the likes of UTC and Danaher.
The collaborative approach also includes the government and similar authorities. L&T Technology Services has become a strategic partner in the IoT CoE for start-ups and is leading the initiative created by NASSCOM in association with the Indian government.
"The governments of countries, India as well as international, where we work, play the dual role of policy making for free and fair trade practice and to invest in future trade. The challenges for the industry can be divided into two facets of visa and immigration," Dr Panda observes.
According to him, immigration and visa readiness are important aspects for ER&D companies to collaborate with customers and the need of the hour is to streamline and ensure faster turnaround of these requirements. "With increased emphasis on 'Make in India' initiatives, the government needs to create an environment that encourages collaboration by ER&D services companies with India centres of global players. Through this, Indian entities will flourish and ensure wealth is brought back to the country," states Dr Panda.
Government's Role Is Key
L&T Technology Services is hoping for the government to increase spend on R&D in the years to come. This will enable it to partner with government organizations for solutions that add value to different sectors such as engineering. Another priority need is that government should allocate funds and encourage investments in newer services and technologies such as big data, engineering analytics and IoT. "There are many government initiatives underway in the form of Public Private Partnerships but the government needs to advertise these better. Innovation is a bottom-up process. Engineers are very talented but need to know the avenues where funding is available. Since government is an enabler and facilitator, it should help cut red tape, accelerate ease of getting approvals for doing business, especially for foreign MNCs interested in investing in India," Dr Panda advises.
The government will also need to help build a complete product development ecosystem and collaborate with the industry in areas such as defence labs, product engineering, support infrastructure, etc. "There is also a need to accelerate talent capacity and capability in specialised areas through higher cooperation between research institutes, industry and academia for well-rounded skill development," says Dr Panda.
Growing With The Customer
As pointed in a recent McKinsey report, linking the physical and digital worlds could potentially generate up to $11.1 trillion a year in economic value by 2025. Currently, most IoT data is not utilized. It is also estimated that industrial IoT market would be worth 151.01 billion USD by 2020. L&T Technology Services is working with its customers across verticals on various IoT projects such as connected thermostats, vibration analysis of industrial machines, safety protection for workers, waste water pipelines for water utilities and health solutions that enables high quality home care for the elderly and the disabled while saving healthcare costs.
"At a time when the new product introductions are getting narrowed at a rapid pace, our customers are looking for speed, agility, new innovation and also for someone who can provide these globally. Our customers want an agile partner, who is reliable and consistently adds value rather than the cost arbitrage which is a given," notes Amit Chadha, Chief Sales Officer and Member of the Board, L&T Technology Services .
While companies strive to streamline platforms and want them to support every possible feature, the user wants a unique set of features that will adapt to their changing needs. This actually challenges engineers and they focus on the next big invention. "As the world becomes more complex, the urge to solve the technology issues requires specific domain knowledge in engineering and niche skill sets. We need engineering algorithms to make these complex variables simple for the end user. At L&T Technology Services, we understand each and every customer pain point and offer solutions and services to address their engineering needs," says Chadha.
Growing With The Economy
Mr Chadha also delves on the macro-economic factors that have created business and opportunity. He says, "We seize opportunities in crisis. Volatile oil and gas prices pose challenges to large refiners and oil and gas companies but provide opportunities for us to add value through frugal engineering and smart manufacturing. We see immense scope in oil and gas sector too. Smart grid investment in R&D and pilot projects are rising. There is a rise in renewable energy demand such as wind farms and PV panel designs. There is also traction in digital oilfields, which use wireless M2M solutions for production monitoring."
Sectors such as oil and gas, which are cutting R&D spends because of oil price pressure, and agriculture are facing some headwinds due to slowdown in agro-economies. Agri-related transport businesses are affected due to this.
"Slowdown in economy does affect but the overall impact on the top line is low as we will continue to receive outsourcing businesses. While all businesses feel the impact of volatilities, we serve customers well through existing and new services and solutions and continue to grow our own business by adding value to customers and adding adjacent accounts," Mr Chadha remarks.
The L&T Technology Services India Play
Giving an insight into its operations, especially the delivery centre spread across India, Kumar Prabhas, Chief Operating Officer and Board Member, L&T Technology Services notes, "The centre at Vadodara in Gujarat is our HQ. It is the second largest employee base for the company in India. Apart from many corporate functions, the Vadodara centre houses multiple teams spanning industry segments such as Off-Highway & Polymers, Plant Engineering, CPG and Industrial Products. It also houses a few cutting edge mechanical engineering labs. The Bangalore centre has the largest offshore employee base. This centre has grown into a highly diverse sectoral function with Telecom, Hi-Tech, Aerospace, Automotive, Industrial Products and Medical teams. There is also a rapid expansion underway in Bangalore."
Mysore base is largely an Embedded Systems hub, where many testing and development centres and labs are located. Some of the company's larger ODCs including Industrial Products, Medical, Application Engineering and Automotive sectors operate out of Mysore. Chennai has been one of its newer expansions, where it's Automotive, Off-highway-Polymer, CPG and Mechanical engineering teams operate. The L&T Thales Technology Services JV is also based out of this city.
L&T Technology Services has been in Mumbai for a long time and recently expanded into the Airoli SEZ with industrial products and telecom businesses. Some of its solutions teams in Analytics and Power Electronics and Automotive Electronics segments are also currently housed here. While, the most recent centre at Hyderabad came along with the Dell Engineering Services (e-Serv) acquisition. At present L&T Technology Services has over 10,000 highly skilled professionals, with 12 global delivery centres and operations in 35 locations around the world.
What Is Working For L&T
L&T Technology Services operates at a global scale and a large number of its customers are Fortune 500 clients. Some of its key international competitors include Altran Technologies, Alten, Akka Technologies, Harman, among others. Some of the big IT players such as TCS, Wipro, HCL, in India also compete with its ER&D services. Despite the tough competition, L&T Technology Services has been registering enviable growth. The company has grown at 19 per cent CAGR from FY11 to FY16. Revenues have grown to a run-rate of USD 500 million from a base of USD 70 million in 2009.The contributions to growth have been both external and internal. Taking stock of the ER&D opportunity, Mr Prabhas says, "Engineering R&D service is at its inflection point now where information technology was in 2000. This is the sector that's going to boom as it is growing at a rapid pace, even faster than the IT industry, which is already matured and commoditized. ER&D has more headroom to grow because the addressable market is much bigger today than what is already addressed. ER&D is also mission critical as whatever we do for clients in this space goes as part of their products that they sell to their clients."
How L&T Technology Services Looks To Maintain The Lead
Industry experts also appear confident that L&T Technology Services will be able to maintain its momentum in the global engineering services space.
Pari Natarajan, Co-Founder and CEO of Zinnov, a leading engineering and digital consultancy, highlights the aspects that have propelled L&T Technology Services into the leadership zone in 8 industry verticals, and across mechanical and embedded technologies.
"There are three factors that differentiate L&T Technology Services - first is the rich heritage in engineering from the parent company; second is their infrastructure investment in multiple state-of-the-art research and testing labs for emerging trends such as IoT, Power Electronics, Engineering Analytics; and the third and most important aspect of their success story is nurturing curiosity towards technology innovation within the organization and among customers - this is evident from over 240 patents co-authored with their customers," he says.
In summary, the pillars of L&T Technology Services growth strategy would be the new lab based service offerings for testing; the focus on solution development with ecosystem partners; new segments in consumer electronics like wearables, remote management of industrial machinery and global partnerships with product companies for IoT. Smart city solutions would be a big component too as would be the push towards future technology such as green energy solutions. L&T Technology Services is all set to grow with the Indian economy in a digital world.
This article was published in BW Businessworld issue dated 'May 16, 2016' with cover story titled 'Back-breaking Acquisitions'
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