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Updated: December 23, 2010 16:10 IST

Three mega-trends driving global R&D investment

D. Murali
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As the head of HCL Engineering and R&D Services, G. H. Rao (http://bit.ly/F4TGHRao) has at least half-a-dozen things to say in answer to my poser, ‘In what ways can our policies and procedures enable the development of engineering research services?’

With a structured focus towards development of engineering research activities, the government needs to establish a complete product development ecosystem that can supplement design with prototyping and manufacture, begins Rao, during a recent interaction with Business Line.

Underlining the need to enable the development of innovation clusters and technology parks, Rao wishes that Indian engineering capabilities are highlighted to the world. “There is a need to brand ‘Engineered in India’ on the lines of the ‘Made in Japan’ campaign run a decade ago,” he adds.

The next three demands in his list are: “Encourage private public partnership through well-defined and implemented offset policies; accelerate talent capacity and capability; and develop capabilities in emerging technologies in industries of strategic interest.” Our conversation continues over the email.

Excerpts from the interview.

If you were to trace the involvement of IT in engineering research, what would you see as the major turning points in its evolution?

Very surprisingly, product engineering and R&D go a long way in India. After IBM and many MNCs left India in the 1970s, HCL was formed to deliver IT products and solutions to the Indian market. In the 1970s, the R&D division of HCL developed many innovative products for the local market, including indigenous database solutions, multi-processor units and microcomputers.

The globalisation of engineering services and R&D happened in the late 1990s, with the huge growth in dot-com era fuelling investments in computing and networking products. Because of the experience in developing computing products for the local market, many Indian players seamlessly moved to a services model and developed many cutting-edge telecom products for market leaders and start-ups. That was the first major inflexion point.

The second inflexion point came in the early 2000s with the collapse of the dot-com era. That put the survival of engineering services at risk and saw major players diversify to traditional R&D markets including aerospace, automotive, medical, and industrial.

What are the major drivers of the growth of engineering research services, globally? Is there any estimate of the size of the market?

There are three mega-trends that are currently driving global R&D investments:

1) Increasing use of electronics: With the ever-lowering cost of electronics, we are seeing higher adoption of device intelligence across multiple sectors including heavy machinery, power train systems and energy. This is helping industries adopt new initiatives like device-to-device communication, remote and proactive device health management, smart devices, and interoperability of devices. For example, with proactive maintenance, all aircraft subsystems will be able to share their health status with the ground systems on a real-time basis, and will ensure planes spend very less time on ground. Or, how about your refrigerator company knowing exactly when to service, because the company gets a real-time, or periodic, health status from your machine?

2) Convergence of technology: We are seeing a blurring and re-definition of traditional markets like networking, computing, telecom, and consumer electronics. With mobile applications experiencing huge growth, convergence is aiding people to take control of their user experience. In the not too distant future, you will be able to control many of your household and personal electronic devices from any device. You can decide to take your video phone call on your TV instead of the mobile phone or continue watching your movie on the mobile phone instead of the TV.

3) Increasing focus of emerging markets: BRIC countries – especially, China and India – are major growth markets for most product companies; and addressing local requirements is a major R&D spend for global MNCs. These markets have a different price-value sensitivity than the developed countries; and sales and market leadership comes to the company that tailors their products. To illustrate, the fastest growing mobile device market in India is not smartphones but mobile phones with battery life of more than 30 days.

Between the NASSCOM Booz report and the recent R&D Magazine research, the global R&D spends are estimated at $1.1 trillion in 2010. Based on market reports, we estimate that the total engineering services outsourcing market in India is about $10 billion, right now, and is expected to grow 4 times over the next decade.

Does India have capabilities to offer in the engineering research services space?

Product ideation, development, manufacturing, and after-launch sustenance are the 4 major elements in the engineering value chain. India is the preferred destination in the global engineering value chain, and has very strong capabilities in product development and sustenance engineering.

Over the last few years, many global products have significant engineering contribution from India – next generation aircrafts to ruggedised medical products, low-cost ASIC chips to telecom products – India is fast establishing a “Engineered in India” mark on the global arena.

However, India lags competitors in product ideation and manufacturing services. India’s low R&D spend in fundamental research, lack of global product companies, and small spend in IP and patent development need to be addressed to compete with developed markets and China, to build the product ideation ecosystem. R&D Magazine estimates that India spends just 0.9 per cent of our GDP on R&D while the corresponding number for the US is 2.2 per cent; Japan, 3.3 per cent; South Korea, 3 per cent; and China, 1.4 per cent.

Because of the lack of large-scale electronics manufacturing in India, we suffer a disadvantage with respect to Taiwan and China in product manufacturability and establishment of high-end manufacturing jobs.

The good news is that all relevant stakeholders – the government, industry and academia – are aware of these gaps, and multiple industry bodies such as the NASSCOM Engineering Services Forum and the ISA are working with them to address the issue.

Can you describe a few examples of successful engineering research services engagements?

Some examples of successful engineering service engagements in HCL include:

* For a telecom company, we helped launch an ultra-low cost, low-capacity ruggedised wireless router / mobile exchange that enables connectivity of remote villages to nearby towns. The system can be powered by battery or attached as module to PCs and needs very little maintenance.

* HCL is helping customers develop next-generation personal entertainment devices – from mobile phones to home entertainment and white good products.

* We have developed Class III (highest safety) implantable devices for some of our medical customers and currently developing non-invasive medical products that will revolutionise the markets going forward.

* HCL has worked on multiple aerospace subsystems on different plane programs and re-engineering and modernised complete airframe for our customer.

In addition, over the last one year, we have developed a Practice team that will invest in creating productised services that will reduce time to market on product development for our customers. The market reaction to the initial solutions is very encouraging and we will launch a few more solutions in the market over the next 12 months.

Any views on the role of IT academia in engineering research?

The academia plays a major role in strengthening our market position as a global end-to-end product engineering marketplace, along with championing fundamental research in the country. Through their research work, academia will open up newer technology areas for engineering solutions – nanotechnology, high performance and grid computing, wireless technologies being a few fields to mention. Through IPs and patent development and tie-up with corporates to monetise ideation, academia will be a key growth driver for the industry.

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