Solidify presence in automotive, heavy engineering

by Ashutosh Desai    Apr 05, 2010

In spite of restricted capital expenses, manufacturers need to continue investing into the launch of new products. This holds true for companies in the infrastructure, automotive, aerospace or heavy engineering space. Manufacturing companies are also increasingly considering R&D of product design and development. According to Nasscom, India rakes in approximately US $1.5 billion from offshored engineering services. Going by the estimated figure Nasscom has predicted for this segment over the next decade, the current financial inflow is just the tip of the iceberg. Speaking to CXOtoday, Dhirendra Verma, vice president, India Services Operations, Altair, highlights the reasons why India is being viewed as a high growth market for product development services and its plans for the future.

What is the size of the market in India that is available for Altair Engineering Services to target and capitalize on?
According to Nasscom, engineering services is a huge market, wherein
global spending for engineering services is currently estimated at US
$750 billion per year. This is very nearly equal to India s entire GDP.
This figure is expected to exceed US $1 trillion by 2020.

Of the US $750 billion spent today, only US $10-15 billion is currently
being offshored. This is a tiny fraction of the total. India brings
home about 12 percent of today’s offshore market, which it currently
shares with Canada, China, Mexico, and Eastern Europe. By 2020, Nasscom
estimates that as much as 25 to 30 percent of a much larger US $150 to
$225 billion market for offshored engineering services could belong to
India — as much as US $50 billion in annual revenue — if the country
builds the capacities, capabilities, infrastructure, and the
international reputation it needs to become the preferred destination
for these complex, high-value services.

Will you be re-looking at how Altair has been traditionally providing services?
We have a core set of engineering services and are basically moving up in the value chain in those engineering services. It is much like software development; where one goes on to develop software products or new releases or new products. By the same analogy, from the engineering services perspective, initially, maybe a decade ago all those services were commodity type services. Now we are actually looking at doing R&D activities for various OEMs.

Could you elaborate on the customers in the Indian market?
The Indian market is effectively booming. Altair India has over 500 customers in India for our different solutions and at any given time we are engaged with product development projects with the top 10-15 percent of these, which includes leading auto OEMs, supplier, heavy engineering, energy, rail, consumer goods. Besides these we are serviced global customers via our global offices with whom we work collaboratively to deliver projects at attractive rates.

We work on our customers’ forward-looking products, ones that might be released 3-5 years down the road, defining how they need to be developed over their regulatory requirements in the markets they are in, to meet various environmental requirements, and to meet various internal OEM regulations that there might be. The same applies to the aerospace and engineering as well.

What are your long term goals in India?
We are acquiring more customers in India and abroad. Our mid-term goal is to solidify our presence in automotive and heavy engineering. The long-term goal is to expand into other verticals which we are present in right now, but would like to be stronger. These are aerospace and industrial.

Is there any change or a shift in the sort of requirements customers have?
The shift that I see is that both global MNCs and local Indian customers look to service providers such as us to do more and more R&D activity. It is hovering towards providing higher and higher value add services and we correspondingly respond to such requirements quite aggressively.

What is the sort of growth you expect this year?
I would say that our growth is roughly going to be about 25-30 percent year over year.

According to you what are the areas to watch out for in the engineering services space?
From the overall trend perspective, I see focus more and more on sustainability. This means manufacturers are looking to build their products with more green material — essentially recyclable material. Not that that is relatively known in the market, it is getting to a point where we are seeing it as a part of our services we offer, we have to upgrade our services to that. That is a clear trend.

Another trend is that, as far as India goes, is the focus on defense and aerospace industry. With defense budgets being increased in India, and also the programs that exist right now are seeing a large influx of aerospace type business. The third one, which is why we are also focusing on this vertical heavily, is heavy engineering. The countries like India and China are investing a lot in infrastructure. China is perhaps farther ahead but India is investing a lot. That will lead to a large requirement for equipment like dump trucks, excavators and so forth. This in turn will require manufacturers to come out with indigenous products. That is the trend we are leveraging to our benefit.