Bram Bluestein, Senior Partner, Booz & Company


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NASSCOM: India leadership Forum 2009,Day2, Session 10A: Building a differentiator around design – developments and opportunities in research and engineering services, Bram Bluestein, Senior Partner, Booz & Company

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Bram Bluestein, Senior Partner, Booz & Company

  1. Mumbai, India February 12, 2009 Discussion Document NASSCOM India Leadership Forum Product Engineering, Research & Development services
  2. Roadmap <ul><li>Opening Remarks </li></ul><ul><li>B V R Mohan Reddy, Managing Director, Infotech </li></ul><ul><li>Krishna Mikkilineni, Managing Director, Honeywell </li></ul><ul><li>Ajay Vasudeva, Head of R&D, Nokia </li></ul>Source: Booz & Company analysis
  3. Engineering offshoring has seen strong growth… g Revenues ($B) India’s Offshoring Revenue (2004–2008) India’s Offshoring Revenue India’s Software Product Engineering Revenue Notes: Does not include Defense Source: Booz & Company client survey; Booz & Company analysis Offshoring Revenue ~$7 – $8 B
  4. … the trend is expected to hold for the coming years e Revenue Potential ($B) India’s Revenue Potential (1) from Off-shored Engineering (2009–2020) Notes: Does not include Defense Source: Booz & Company client survey; Booz & Company analysis India 2020 Off-shored Revenues ~$30 B India 2015 Off-shored Revenues ~$20 B
  5. India needs to continue to innovate to meet challenges Source: Booz & Company analysis <ul><li>Short term economic and political challenges </li></ul><ul><ul><li>Economic slowdown </li></ul></ul><ul><ul><li>Financial crunch across sectors </li></ul></ul><ul><ul><li>Potential backlash against off shoring (in light of wide spread job losses) </li></ul></ul><ul><li>Structural challenges </li></ul><ul><ul><li>Weak infrastructure (educational, research, specialized labs, eco system, and so on) </li></ul></ul><ul><ul><li>Capacity & capability (weakness in quality of education, and lack of right skill sets) </li></ul></ul><ul><ul><li>Increasing competition from other low cost countries - India is not alone in this game </li></ul></ul><ul><li>Operational impediments </li></ul><ul><ul><li>Business models (emergence of new models, that often conflict with traditional vendor-captive models) </li></ul></ul><ul><ul><li>Value Proposition - departure from arbitrage to a complex set of priorities that vary across companies </li></ul></ul><ul><ul><li>Human resource challenges - managing quality-quantity-consistency </li></ul></ul>Challenges
  6. Some just don’t think India is an attractive option—Bangalore as an offshoring Mecca is no more sacrosanct City Score of Overall Engineering Offshoring Attractiveness (2008) CLIENT EXAMPLE Wrt Average Score Krakow Prague Bangalore Budapest Cairo Moscow Warsaw Bucharest St. Petersburg Istanbul Bratislava Izmir Sofia Tallin Vilnius Riga Indian Cities Hyderabad Pune Source: Booz & Company client survey; Booz & Company analysis
  7. India, while not under threat, is being challenged % 80% India 20% Others 66% India 34% Others 60% India 40% Others 2003 2006 2008 / 2009 Booz Clients Consideration of Engineering Offshoring to India vs. Rest of World 1 (2003–2009) 1) Based on Booz client survey Source: Booz & Company client survey; Booz & Company analysis
  8. Captives, owing to a singular focus, often have better capabilities Overall Ranking of Engineering Service Providers by Engineering Capabilities Rankings are Relative to Average Company Score, 2008 Advantaged Disadvantaged L K J I H G F E D C B A Captive Overall Engineering Capabilities Advantaged Vendor Disadvantaged Vendor Captive Notes: Alphabet labels represent indicate company Overall ranking based on multiple variables including company level assessment, operational assessment and market positioning strategy Ranking was based on the average of domain/vertical specific scoring weighted by the domain’s market potential for the vendors Source: Booz & Company analyses, Booz & Company IC, Company Interviews CLIENT EXAMPLE
  9. Three key takeaways <ul><li>ERD market is attractive - currently $5-6.5 B, expected to reach $30-$40 B by 2020 </li></ul><ul><ul><li>But you need a clear, actionable plan to benefit from the market that resonates with your customers, business model, operations, and capabilities </li></ul></ul><ul><li>Dealing with market downturn </li></ul><ul><ul><li>Belt-tightening is already happening, but going forward lean operations is the norm </li></ul></ul><ul><ul><li>Based on our client experience, on average, 20-25% cost can be eliminated </li></ul></ul><ul><li>New business-operating models and value propositions need to be brought to market </li></ul><ul><ul><li>Vendors can’t be all things to all people …you’ll have to choose areas of focus, & build deeper capabilities, or risk being marginalized and struggling to keep its head above water… </li></ul></ul><ul><ul><li>You will need the answer to “..what is my core vertical..”; “what is my primary value proposition, and how is it differentiated in the market”; “.. Where do I want to be in 5 years, and do I have an actionable plan to get there” </li></ul></ul>