ER&D may grow to $30-40 bn by 2020, says Nasscom

Growth rate likely to be higher than that of IT industry; the sector had posted $20 bn revenues last year

The Engineering Research & Development (ER&D) business, the R&D in Information Technology from OEMs and other segments, is expected to grow to $30-40 billion by 2020, from last year's $20 billion, says the National Association of Software and Service Companies (Nasscom). It is expected to grow at a higher rate than the IT industry, said the industry body.

Speaking to reporters after announcing a memorandum of understanding (MoU), B V R Mohan Reddy, chairman, Nasscom, said that ER&D is seeing a higher growth and last year, it was worth $20 billion out of the $148 billion worth of businesses of Nasscom member firms.

 

"It is seeing a higher growth of around 15 per cent while the industry is at 12-14 per cent, as earlier mentioned," he said. The industry is going through a change and Nasscom feel positive as the whole industry is becoming digital, regardless which sector they are in.

"We are advising our member companies that the digital is a sector to focus," he said.

Samir Yajnik, president, sales and COO, Asia Pacific, Tata Technologies Limited, said that almost 50-55 per cent are Original Equipment Manufacturers and Captive players, while the rest are engineering companies, in the ER&D space. The industry is trying to push the growth of this sector from the current expected growth rate of 15 per cent up to around 20 per cent. Expectations are that the ER&D industry could grow up to $30-40 billion in 2020, he added.

Speaking about the industry, Reddy said that the first quarter results are starting to come and at present, it is maintaing the guidance of industry growth at 13 per cent in constant currency terms. He added that the predictions depend on various factors, change of which would affect the predictions also.

"Our member companies are saying that the pipeline continue to be strong. There are some changes in the product mix that we would have as opposed to the traditional IT services, now the new technologies have come by, new disruption is happening, more automation is coming to play at this juncture," he said.

He said that while the type of people the industry add is seeing some changes, the industry is expected to add around 2,30,000 engineers, almost the same as it added last year.

 

"Automation, productivity and new technologies have come into play which does not require so many people. Its a combination of all these factors. We think we will be adding around the same numbers," he added. There is also no sign of change in entry level salary and it will remain constant for near future.

The IT-ITeS Sector Skills Council of Nasscom announced that it has signed a MoU with Anna University to offer 'Foundation Skills in Integrated Product Development' (FSIPD) program courseware, developed by the council. The strategic alliance, a first of its kind, with the university aims to offer FSIPD program to all undergraduate students as an elective course to enhance the employability skills of these students. This initiative will benefit over 10,000 students in the initial year, to get them industry ready.