India for the world – Higher ER&D spends in 2022 confirms NASSCOM−Deloitte’s Global Engineering R&D Pulse Survey 

• India continues to be the ER&D destination of choice with over 70 percent organisations with India ER&D presence planning to increase spend towards their India GCCs and ESPs this year
• About 85 percent of the surveyed organisations are already leveraging a GCC for their ER&D activities, with ~75 percent of such centres being in India
• While designing innovative, connected, and customer-centric solutions was voted by most ER&D leaders (54 percent) as one of their current top investment areas, developing products for sustainability and circular economy followed closely, with 52 percent of the respondents placing emphasis on the need for 'greening' their product portfolios
• Developing Industry 4.0 solutions, and innovative customer-centric products are projected to be crucial investment areas for the global ER&D industry in the next three years as cited by more than 75 percent of the industry leaders
• ER&D spend in India GCCs within the automotive and transportation and industrial sectors is expected to witness 10-25 percent growth, mainly due to the advent of digital engineering within these sectors
• 50 percent of the respondents believe that AI/ML, automation, and big data analytics will be the three most critical digital engineering skills for the Indian ER&D ecosystem in the next few years

New Delhi, May 20, 2022: A joint survey by NASSCOM and Deloitte Touche Tohmatsu India LLP (DTTILLP) predicts that organisations with an ER&D presence in India are looking to increase investments in their India Global Capability Centres (GCCs) or Engineering Service Providers (ESPs); of these, almost 50 percent plan to increase investments by more than 10 percent. These survey results support the global prediction that ER&D organisations will drive the next wave of offshoring in the country. One of the biggest motivators for global organisations has been India’s response to COVID-19 over the past two years. The proactive strategies adopted by the ecosystem to ensure business continuity and their resilience when faced with the need to scale rapidly, positioned India as the preferred investment destination. This, clubbed with the availability of rich talent, digital capabilities, and a diverse start-up ecosystem for collaboration, has also pushed the demand for India Global Capability Centres (GCCs) and Engineering Service Providers (ESPs) across the globe.

About 72 percent respondents with an India GCC plan to step up their spend on it in 2022; of these, 50 percent plan to increase this spend by more than 10 percent, which is a higher than the rise in global R&D budget. Nearly 52 percent of the surveyed companies with India ESPs plan to increase their spend on them in 2022, and of these, 50 percent plan to increase this spend in the range of 10-25 percent. India ER&D GCCs continue to hold key responsibilities and are expected to also drive innovation and manage end-to-end product development in the next three years. The ER&D GCCs in India have moved the HQs’ expectation needle from business continuity and scale building to driving frontline innovation out of their centers.

Eighty percent respondents that have ER&D organisations are poised to adopt a co-creation model with start-ups, ESPs, academia, and competitors to accelerate their initiatives across sectors. This trend is driven by the increasing pressure from the rapidly evolving technology landscape, accelerating innovation cycles, and the rising demand for faster time-to-market.

Sharing his view on the survey findings, Keerthi Kumar, Partner, DTTILLP, said, “The Indian ER&D market is projected to grow at a CAGR of 12-13 percent until 2025 and this growth story has been well reinforced by the findings of this ER&D pulse survey. With more companies planning to strengthen their presence in the country, the growth prospects for India GCCs and ESPs have grown manifolds.” Keerthi Kumar added, “Globally, ER&D in many organisations have started prioritising building a technology ecosystem, developing key skills and talent, and improving the ER&D performance by digitalising the end-to-end product development lifecycle. What is interesting to note is that about 40 percent of such companies, plan to route investments for these initiatives to their India GCCs and ESPs. India is thus poised to be at the forefront of this revolution, playing a crucial role in augmenting the overall R&D strategy of global companies.”

Commenting on the findings, KS Viswanathan, Vice President, Industry Initiatives, NASSCOM, said, “In the last few decades, the engineering R&D sector has really grown by leaps and bounds across the world and has continued to witness impressive growth in revenues. India continues to be the destination of choice for global ER&D. Companies across geographies are looking to leverage their India GCCs to deliver more activities due to the availability of key skills and talent at scale. Indian GCCs and ESPs are driving end-to-end innovation, product strategy and development, and manufacturing products from India for the world.”

According to the survey findings (drawn after analysing responses from 104 R&D leaders across 19 countries and 12 sectors), more than 75 percent of the industry leaders have projected the development of Industry 4.0 solutions, and innovative customer-centric products as crucial investment areas for the global ER&D industry in the next three years, while the immediate priority is to develop sustainable products and enable a circular economy.

Talent development with rapid scaling of digital engineering skills continues to be one of the top leadership priorities for India within ER&D. Apart from research and advanced engineering gaining further grounds in India, due to the expertise in digital engineering skills, such as AI/ML/DL, automation, and cyber security, the country is a top choice for delivering activities such as software design and engineering, and testing and validation. AI/ML, automation, and big data analytics are the top three digital engineering skills critical for India GCCs and ESPs to remain industry ready. Similarly, product management, software development, and manufacturing engineering are the top core engineering skills to be further developed in India GCCs and ESPs.

With accelerated adoption of hybrid working and products becoming more connected and digitalised, normally in-office ER&D function expects to sustain about 33 percent of its workforce in hybrid or remote models by 2024. Even non-tech sectors such as energy, oil & gas, and industrial are witnessing a similar trend for some of their digital engineering roles.

Building in-house remains the most favorable strategic choice for 70 percent of the surveyed companies to accelerate their R&D initiatives. However, 80 percent respondents that have ER&D organisations in India are poised to adopt a co-creation model with start-ups, ESPs, academia, or competitors to accelerate their initiatives across sectors, and the approach has the potential to become a mainstream operating model in the future. This trend is driven by the increasing pressure from the rapidly evolving technology landscape, accelerating innovation cycles, and the rising demand for faster time-to-market.
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About NASSCOM - Deloitte Global ER&D Pulse Survey 2022:
The 2022 edition of the survey provides a comprehensive view of the thinking in the ER&D function in enterprises worldwide – covering 104 respondents from 19 countries spanning across North America, Germany, India, Japan, France, Netherlands, Sweden, United Kingdom, Italy, Ireland, Denmark, Saudi Arabia, Israel, Taiwan, China, Australia, Singapore, and South Korea. It further examines the growth areas in 12 sectors (logically clubbed into 8 for the purpose of this report), encompassing automotive & transportation, aerospace & defence, telecom, software products, medical devices, hardware & electronics, industrial, and energy, oil & gas.

The survey covers a diverse range of topics pertaining to the global market in ER&D, ranging from their challenges to their 2022 priorities and their medium-term (i.e., 2024) plans. It also studies the advent of digital engineering in the traditional R&D function, and leaders’ take on the role of their in-house globally distributed Global Capability Centers (GCCs) and Engineering Service Providers (ESPs).

Notes to the editor (for reference purposes only)

This joint press release has been issued by NASSCOM and Deloitte Touche Tohmatsu India LLP
Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee (“DTTL”), its network of member firms, and their related entities. DTTL and each of its member firms are legally separate and independent entities. DTTL (also referred to as “Deloitte Global”) does not provide services to clients. Please see www.deloitte.com/about for a more detailed description of DTTL and its member firms.

The National Association of Software and Services Companies (NASSCOM®) is the premier trade body and chamber of commerce of the Tech industry in India and comprises over 3000-member companies. Its membership spans across the entire spectrum of the industry from startups to multinationals and from products to services, Global Capability Centres to Engineering firms. Guided by India's vision to become a leading digital economy globally, NASSCOM focuses on accelerating the pace of transformation of the industry to emerge as the preferred enablers for global digital transformation. NASSCOM’s strategic imperatives are to reskill and upskill India's IT workforce to ensure that talent is future-ready in terms of new-age skills, strengthen the innovation quotient across industry verticals, create new market opportunities - both international and domestic, drive policy advocacy to advance innovation and ease of doing business, and build the industry narrative with focus on Talent, Trust, and Innovation.

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