Engineering R&D rainmakers bag mega deals from home offices

BENGALURU: Engineering R&D services is becoming increasingly one of India’s big success stories. Deals in the segment had it rough in early 2020, like most deals, but have since bounced back. And some of the rainmakers in the space have won large deals, upwards of $50 million each, from their home offices.

Amit Chadha, the deputy CEO and board member at L&T Technology Services (LTTS), together with colleague Subrat Tripathy, won an over $100 million deal from ExxonMobil last year. The contract involves supporting two ExxonMobil integrated refining and chemicals manufacturing facilities in the US, including site sustenance, engineering and control automation. LTTS did not disclose the name of the customer, but TOI was told that LTTS displaced a US vendor.

“We will be providing an onsite-offshore model for engineering site support and expanding their digital footprint. We had worked with the customer before at their sites in Canada and Singapore. That’s where we got our dog tags and we took it from there,” Chadha said. Chadha said they have walked away from deals where they think they can’t meet margin objectives.

LTTS has embraced a glocal model –it opened its sixth engineering centre in Rockford to cater to aerospace and defence customers. It has a facility in Israel that houses the next-generation cyber-security centre of excellence and a ASIC hardware design centre. Its Gothenburg digital engineering centre is a nearshore development hub for LTTS' customers in Europe.

LTTS works with 53 of the world’s top ER&D companies, across industrial products, medical devices, transportation, telecom & hi-tech, and process industries.

In engineering services, there’s growing interest in build-operate-transfer (BOTs) models. Vendors are also gravitating towards high-margin ER&D contracts in automotive, aerospace and semiconductors. “The main drivers of large engineering deals over the past year have been cost takeout, M&A restructuring, partnerships, captive divestment and product carveout,” said Pareekh Jain, founder of engineering services advisory Pareekh Consulting.

Global ER&D spend continues to be on the upward trajectory and is set to touch the $ 2.1 trillion by 2022, up from $ 1.7 trillion in 2017. The spends, driven significantly by the top 2000 corporates, is expected to touch $ 900-$1000 billion over the same period with automotive and semiconductors accounting for 44% of total corporate ER&D spend, showed data from a Nasscom report.

Engineering R&D is the fastest growing vertical in the Indian IT services space. Nasscom estimates that India’s ER&D market will grow to $42 billion by the 2022 fiscal, from $24 billion in FY2017. The growth drivers include industry 4.0, EVs, autonomous/ connected vehicles, smart products/ services, and automation.

Last year, KPIT cofounder Kishor Patil led two significant deals in the auto engineering space – Veoneer and BMW, with total contract values (TCVs) of $60 million and $50 million respectively. Sweden-based Veoneer focuses on advanced driving assistance systems (ADAS). Veoneer will leverage software technology from KPIT for various vehicle programmes globally for autonomous driving, ADAS and AUTOSAR (a worldwide partnership that develops standardised software framework for intelligent mobility).

Harmeet Chauhan, SVP of industrial & engineering services at Wipro, and Vinay Firake, SVP and MD for Wipro Nordics, were the rainmakers for one of the company’s largest deals in automotive software engineering services – from Italy’s Marelli. Sources told TOI that the deal is around $250-$300 million (Rs 1,850-2,220 crore). This is the second deal win for Wipro from Marelli.

Persistent Systems CEO Sandeep Kalra won an over $50 million deal in ER&D from an independent software vendor (ISV). Kalra said they are helping enterprises build and launch newer digital products. “One of our larger deals is with one of the largest tech firms on the patient engagement platform and when you get that kind of work, they don’t under ball on the dollar to the absolute last cent. They are looking at you to bring the best of the talent,” he said.