Friday, November 8, 2024

Why E-R&D is outpacing IT sector

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Amid geopolitical tensions, global economic challenges, government protectionism, and ongoing supply chain disruptions, the global Engineering Research & Development (ER&D) sector has demonstrated resilience and growth despite headwinds. It’s evident from the substantial increase in ER&D expenditure, with India’s share in global business ER&D sourcing expected to rise from $44-45 billion in FY23 to $130-170 billion by FY30. 

This starkly contrasts with the relatively flat performance of the IT sector in recent years, which will grow at 3-4% this year, estimates Amit Chadha, CEO & MD of LTTS, while ER&D will grow around 7%. 

It brings up the question: what is propelling the growth of ER&D vis a vis the IT sector?

The pace of technological change has accelerated considerably, says Chadha. “Earlier the cycle used to be between 5-6 years, today the technology change is happening on a 3-year cycle,” he explains. 

Innovations in artificial intelligence (AI) and cyber-cloud technologies are at the forefront of this rapid evolution, “creating immense pent-up demand and driving several changes across industries”. LTTS, till December 2023, had filed around 57 patents for AI. 

Secondly, in the wake of the pandemic, supply chains have undergone profound disruptions. “After Covid, people wanted to build smaller plants, [and] today a lot of people are building regional plants while supporting and sourcing from the region as well,” says Chadha. This shift towards regional manufacturing aligns with the “China plus one” strategy, where businesses diversify their production bases beyond China to enhance sustainability. However, Chadha says, this surge in demand has also brought up a shortage of plant engineers, further driving the need for advanced ER&D services.

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