While the complexity of the ERD vertical is a challenge for Indian IT companies, it also offers a much bigger and lucrative opportunity. The fact that the segment requires engineers with a high level of understating of the various domains and to be trained on various design platforms places the Indian IT companies on a superior pedestal as compared to global competitors, primarily because of the mammoth pool of engineers that the country possesses.
India churns out about 1.5mn engineers every year, from around 6000 engineering colleges spread across the country. This is, by far, the highest pool of engineers that any country possesses; China comes second at 1.25mn and the US is a distant third at 170,000. Indian IT companies are in an excellent position to leverage this huge pool of engineers to establish their presence in the ERD domain.
Indian IT companies have an unprecedented opportunity to make ERD their forte over the next decade. The opportunity is driven by both demand- and supply-side factors. On the demand side, there is an increasing level of acceptance of the ESO model, driven by the need for companies to reduce cost, reduce time-to-market, and capture emerging-market opportunities. On the supply side, Indian companies have the world’s largest pool of engineers at their disposal, providing them a highly competitive and inimitable advantage.
Indian companies can enhance their presence in the ERD domain on three fronts:
New clients: Leveraging their performance with the existing client base in the ERD domain, Indian IT companies can tap new clients—companies that have not outsourced till date.
Cross-selling to existing clients: Indian IT companies currently service many companies that spend significantly on ERD, but have outsourced other IT operations (ADM, IMS). Cross-selling to these companies should be relatively easy.
Moving up the value chain for existing ERD clients: In addition, companies can move up the value chain by engaging with their existing ERD customers on a more strategic level and capturing a larger share of their wallet.
Amongst the large Indian IT companies, HCL Tech and TCS have a significant presence in the ERD domain and are the potential beneficiaries of increased outsourcing towards this domain. Amongst smaller companies, Cyient, KPIT Tech, and Geometric Software’s businesses are inclined towards this domain and could be potential beneficiaries. However, almost all IT services companies that have a presence in the manufacturing vertical have been trying to make inroads into this domain. Given the abundant pool of engineers available to them, it will not be surprising if a few new names make significant inroads into this domain over the next decade.
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