Global R&D Service Provider Ratings 2014

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Global Service Providers Ratings -201425th September, 2014

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Global Engineering R&D Landscape

Key Trends in Global Engineering & RD Services

GSPR – 2014 Rating

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$577 Billion G500 R&D spend in

2014




R&D spend continues to be on the rise with focus on building better, faster and smarter products

577 BillionR&D spend by

Global 500 companies

AutomotiveElectrical &

Consumer Electronics

Software and Internet

SemiconductorTelecom &

Networking

FY 2014

USD 110 BN USD 68 BN USD 59 BN USD 48 BN USD 45 BN

VolkswagenToyota Motor

General MotorsRobert BoschHonda MotorFord Motor

DaimlerBMW

Nissan MotorDenso

Samsung ElectronicsPanasonic

SonyCanon

Hewlett-PackardApple

ToshibaFujitsuFujifilm

Mitsubishi Electric

MicrosoftGoogle

IBMOracle

Amazon.comSAPEMCeBay

FacebookElectronic Arts

NokiaCisco Systems

EricssonHuawei

TechnologiesAlcatel-Lucent

NSNNTT

Research In MotionTelefonica

ZTE

IntelQualcomm

STMicroelectronicsBroadcom

Texas InstrumentsRenesasTaiwan

SemiconductorAMD

Applied MaterialsNvidia

Source: Zinnov Research and Analysis 4

The addressable Engineering and R&D globalization and services opportunity stands at USD 170 billion

Total Addressable R&D Globalisation & Services opportunity

USD

170 Billion

USD

55 Billion

Addressable Market*

Addressed Market

Total Addressed R&D Globalisation and Services Market

Current Addressed ER&D market through offshore in-house R&D Centres

USD

29 Billion

USD

26 Billion

Addressed ER&D Globalisation & Services market through Outsourcing partners

*Opportunity Includes market for Captives , Offshore R&D Service Providers and Onshore R&D Service Providers

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$38 Billion by 2020

India’s ER&D services and Globalization revenue (Expected)

India Engineering R&D Landscape

Source: Zinnov Research and Analysis

India’s ER&D globalization and services market is expected to reach $38 Billion by 2020

Product Engineering Services Growth Rate ( In USD Billions)

USD

16.56 BN

USD

18.20BN

9.9%Growth rate

Note 1: There is an increase of $264 Million to the overall numbers for 2013 because of a revision in the Automotive vertical numbers, we have corrected the estimates for 2013 retrospectively.Note 2: The estimated growth does not include Defense

12.05 %

Growth rate (Expected)

FY 2013 FY 2014 FY 2020 (E )

USD

38BN

FY 2013 FY 2014

$6.193$6.887

$10.372$11.312

9.06%

11.20%Service Providers

Service Providers

In-houseR&D Centers

In-house R&D Centers

All figures in USD Billion

• Service provider growth driven by entry of existing players into newer verticals

• Verticals like Medical Devices, Industrial Automation and Energy and beginning to adopt outsourcing aggressively

• New In-house R&D centers are in incubation stage, growth through ramp-ups will reflect in coming years

Source: Zinnov Research and Analysis 7

Growth

Growth

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Engineering Services is getting re-

defined




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aggressively pursuing the “in-country sourcing” opportunity

collaborating with start-ups to drive innovation

exploring newer customers segments for added growth

building deep solution capabilities for the connected world

The Product Engineering

landscape has evolved and Service

providers are responding to the

change by….

diversifying into newer verticals because of reduced entry barriers


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Indian Companies

Leaders in the ER&D Services




Zinnov’s GSPR is based on a proprietary framework that effectively quantifies qualitative data and subsequently uses a AHP model

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Data Point Classification AHP & Rating Scale

Ranking & Zones Data Extraction & Rating

Methodology

AHP is a statistical model used for assigning weights to the dimensions and the data points. Rating point of 1 to 5 was decided for each data

point based on criteria

For all data points extracted from RFIs, corresponding rating was mapped in the Rating Scale

Companies were ranked based on the scores arrived from the previous steps, using the parameter based modeler. The vertical specific

characteristics were then included to plot the companies in Zinnov Zones

Classification of company and vertical specific data points available from various RFIs

Look-upScore Rank

AHP Rating Scale

Data Point 1Data Point 2

1 2 3 4 5

The GSPR rating is done by evaluating the participants across pre-identified key performance parameters

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Human CapitalHuman Capital is critical in analysis of company’s capability to deliver specific engineering needs. We considered vertical wise and overall headcount, distribution by product development breadth, experience level, and special/additional qualifications

Capabilities & Innovation

Capabilities of the organization is assessed to understand the overall ability of the vendor to deliver on the requirements of clients; it encompasses people dimension, operational capability, business models employed, Innovation & IP / solutions / Frameworks / Products built / delivered by the organization

FinancialsFinancial Strength of a company plays a key role in the assessment process; apart from showcasing the financial health of the organization, it also contributes in analyzing the ability to scale, invest and potential of the vendor to support the customer’s growth

Ecosystem LinkagesStrategic partnerships with OEMs and industry leaders, University connects for research, membership and contribution to global development forums tell a lot about the provider’s capability in harnessing the ecosystem in R&D and product engineering space and hence is an important criterion in evaluation

InfrastructureInfrastructure investment (Labs, ODCs) demonstrates capability and commitment to growth. Also, geographic spread and expansions throws light on the ability to leverage geo specific advantages. Investments in certifications and adoption of standards have strong bearing on determining the processes orientation that is needed for delivering on remote product engineering and R&D activities

Business Sustainability Client relationships, engagement model maturity with the customers, the ability to articulate and create a USP and the Governance Risk and Compliance status are indicators of sustainability. We used these parameters to assess the sustainability index of the partner, which help customers differentiate long term players from others

Rating Parameters

Rating Parameters

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Zinnov Zones – Overall Rating Model

Specialization, R&D Practice Maturity (depth and breadth of services), Innovation & IP, Eco-System LinkagesEmerging Established

Niche

Expansive

Sca

le, #

of

Vert

icals

serv

iced, C

lient

Spre

ad • Emerging Companies with

Presence Across Multiple Verticals• Focus on Building Competencies

Across Multiple Verticals• Developing Cross PDLC

Competencies across multiple verticals

• Emerging Companies in Niche Verticals

• Focus on Building Niche R&D and Vertical Competencies

• Developing Cross PDLC Competencies in Focus Verticals

• Market Leaders across verticals • Presence Across Multiple

Verticals• Strong Focus on IP Creation,

Innovation and Ecosystem Linkages across most verticals

• Excellent Breadth and Depth of Services across most Verticals

• High Scalability across most verticals

• Market Leaders in Niche Verticals

• Well Established Competency in One or Two Verticals

• Excellent Breadth and Depth of Services in Focus Verticals

• High Scalability in focus verticals

What has changed?

• The Y-Axis earlier was a function of vertical coverage.

• In 2014, the Y-Axis is a function of 3 key parameters (Scale, Vertical Coverage and Client Spread)

• The additional dimensions were added based on customers feedback to bring more granularity

• The Y-Axis should not be compared to GSPR 2013 ratings on a like for like basis

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Overall Rating

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VERTICAL WISE RATING

ZINNOV ZONES EXPLAINED

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Nurture Zone

Breakout Zone

Execution Zone

Leader Zone

Att

ribute

sC

halle

nges

Reco

mm

end

ed Init

iati

ves

• Acquiring new customers., diversifying revenue

• Building product engineering competencies

• Developing Engineering Services specific Sales organization

• Understanding the differences between PES/ IT Service business

• Focus on targeted customer segment and vertical

• Build technology competency in niche focus areas

• Focus on building credibility by delivering on initial projects

• New entrants, providing skill sets to supplement R&D bandwidth

• Presence in only a few verticals: Focused growth

• Innovation, if at all, in process optimization

• Limited number of clients• Typically work in T&M model

• Acquiring large customers• Growing existing accounts and

repeat business• Developing across the PDLC

competencies• Building domain capabilities• Building a product engineering

culture within the organization

• Focus on PDLC Skill Development• Focus on augmenting domain

skills• Work on building trust with

existing customers

• On the way into big league, delivering R&D services effectively

• Presence in two or more verticals• Innovation frameworks resulting in

tangible benefit to customers• Typically work in T&M and Fixed

Price model

• Growing small accounts into deep relationships

• Building Concept to Market Capabilities with deep domain expertise

• Building relevant IP’s• Executing on new & innovative

business models• Limited self owned R&D infrastructure

• Focus on IP creation; create vertical agnostic IPs

• Focus on Account Mining and execution on new business models

• Focus on internal and external innovation incubation efforts

• Capable of delivering complete product development as a true engineering partner

• Presence in almost all verticals• Reusable IP’s built, and benefits

quantified• Capable of working in all models,

including Risk Reward and Revenue Share

• Succeeding as go to market partner in emerging markets

• Building end to products of their own• Building product management

capabilities• Scaling new vertical practices in R&D

services to drive continued growth• Scaling R&D infrastructure

• Focus on end customer of customers

• Drive customer led innovation• Build strong Go-To-Market

capability to become viable channel partner for customers

• Capable of performing concept to Go-To-Market for the product

• Presence in almost all verticals• Formal innovation culture, resulting

in IP’s and numerous tactical innovations

• Capable of working in all models, including Risk Reward and Revenue Share

AEROSPACE - 2014

AUTOMOTIVE - 2014

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COMPUTER PERIPHERALS AND STORAGE - 2014

CONSTRUCTION AND HEAVY MACHINERY - 2014

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CONSUMER ELECTRONICS - 2014Zinnov Zones – Leading Service Providers


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ENERGY - 2014Zinnov Zones – Leading Service Providers


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INDUSTRIAL AUTOMATION - 2014

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MEDICAL DEVICES - 2014


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OUTSOURCED SOFTWARE PRODUCT DEVELOPMENT – ENTERPRISE SOFTWARE


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OUTSOURCED SOFTWARE PRODUCT DEVELOPMENT – CONSUMER SOFTWARE


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SEMICONDUCTOR - 2014


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TELECOMMUNICATION - 2014


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TRANSPORT - 2014


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Bangalore 69 "Prathiba Complex", 4th 'A' Cross, Koramangala 5th Block,Bangalore-560 095. Phone: +91-80-41127925/6

Gurgaon Office:First Floor,Plot no. 131, Sector 44, Gurgaon-122002,Phone: +91 124 4420100

SingaporeLevel 42, Suntec Tower Three8 Temasek BoulevardSingapore 038988Phone:+65 6829 2123

California Office3080 Olcott Street Suite A125, Santa Clara, CA 95054 Phone: +408-716-8432

Texas21, Waterway AveSuite 300 The WoodlandsTX-77380 USAPhone:+1-281-362-2773

BeijingMeilifang Tower 4, Entrance 4, 10/F #1003,11 Beiyuan Shuangying Road,Chaoyang District, BeijingChina 100012

Thank You

Global R&D Service Provider Ratings 2014

Small Business & Entrepreneurship

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