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Mumbai, India · February 13, 2008
Booz Allen Hamilton – NASSCOM Presentation
This material was used by Booz Allen Hamilton during an oral presentation; it is not a complete record of the discussion.No part of this document may be circulated, quoted, or reproduced for distribution without prior written approval from Booz Allen Hamilton.
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Engineering lies at the very heart of organizations
Note: Based on top engineering spenders/key innovators in Automotive, Aerospace, Telecom, Semiconductor, Consumer electronics and Pharmaceuticals verticals
Source: Booz Allen IC, Booz Allen Innovation 1000 database, Booz Allen analyses
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IT is important – but engineering is in a league of its own
70%
60%
30%
75%80%
95%
0%
20%
40%
60%
80%
100%
Engineering Finance Sourcing Sales & Marketing Manufacturing IT
Percentage of Respondents Considering a Function Core/Strategic(2007)
Source: Booz Allen IC, Booz Allen client engagements
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IT is linked to the entire value chain but engineering sits at the heard of it
FinanceSales &
Marketing
Product Strategy
Sourcing
IT
Manufacturing
Working Relationships B/W Different Functions
Engineering
Source: Booz Allen IC, Booz Allen client engagements
Strong linkage
Tertiary linkage
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Companies such as Toyota are built around engineering
QRD
Cost
PRODUCT STRATEGY
PROGRAM MANAGEMENT ENGINEERING SOURCING PRODUCTION
ConservativeInvestment
DesignRe-use
CE asIntegrator
CreativeTension
StrongFunctional
Engineering
ProductionOrientation
Incre-mentalism
Disciplineand
ScheduleMaintenance
Long-termSupplier
Competition
SupplierCapability
Development
JIT andKanban
SupplierEngineering
Follower
Configuration Simplicity
RevealProblems
ContinuousImprovement
Long-termSupplier
Relationship
BundledOutsourcing
Toyota Business Model
Source: Booz Allen IC, Booz Allen client engagements
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Engineering landscape is evolving more rapidly
Past: Extent of Engineering (1900s)
Dominant region for engineering activity
Emerging regions for engineering activity
Source: Booz Allen IC
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Engineering – Present
Present: Extent of Engineering
Source: Booz Allen IC
Dominant region for engineering activity
Emerging regions for engineering activity
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The Future
Future: Extent of Engineering (2015)
Source: Booz Allen IC
Dominant region for engineering activity
Emerging regions for engineering activity
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Following the shift, companies are increasingly utilizing global model for engineering
Share of Foreign R&D Sites – All Companies –
55%49% 47%
40% 38%32% 30%
45%51% 54%
60% 62%68% 70%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1975 1980 1985 1990 1995 2000 2006
Top Reasons for New Site Planning
TechnologyClusters orAcademic Institutes
(20%)
Markets orCustomers
(24%)
Proximity toProductionFacilities
(12%)
Qualified Workers(18%)
Low-Cost Skill Base(18%)
BusinessEnvironment
(9%)
Note: Based on survey of companies with home base in Europe
Source: Booz Allen Survey of leading companies
Pe
rce
nta
ge
of
Site
s
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Companies view engineering services through a global lens
Sites Under Active Consideration for Engineering Services
Note: Weighted average scores based on client ratings
Source: Booz Allen client study; Booz Allen analysis
Satellite Site
Global Service Site
Sao Paulo
Bangalore
HyderabadPune
Gurgaon
Mysore
Johannesburg
Budapest
Mexico City
MoscowSt. Petersburg
Beijing
Shanghai
Changchun
Guangzhou
Bangkok
Manila
Chennai
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Business of engineering offshoring is competitive—many want a piece of this pie
Government Support for Engineering Offshoring (Present)
Source: Booz Allen IC
Forced Support
Active Support
Passive Support
Policy Support forEngineering Offshoring
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Countries like China are formulating policies that are aggressively geared towards attracting high value add services
India China Mexico RussiaCzech
Republic Poland Hungary Thailand Philippines
Tax Reduction(e.g. tax abatement in SEZs)
Subsidies & Grants(e.g. Subsidy on percentage of total cost)
Infrastructure Improvements(e.g. access to communication, power, water supply, roads, etc.)
Training & Education(e.g. grants to train employees for new roles, grants to R&D institutes)
Comparison of Incentives Offered by Countries for R&D/Engineering Services(Relative Scale)
Strong Support
Moderate Support
Passive Support
Policy Support forEngineering Offshoring
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So yes, it is a big opportunity
Market Potential for India(2004 – 2020)
Re
ven
ue
Po
ten
tial (
$ B
n)
$0
$5
$10
$15
$20
$25
$30
$35
$40
2004 2006 2008 2010 2012 2014 2016 2018 2020
CommercialOpportunity
DefenseOpportunity
Source: Booz Allen NASSCOM study; Booz Allen IC; Industry research, Expert Interviews
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Yes, India leads the pack for engineering services, currently
0
1
2
3
4
5
6
India China Mexico Russia CzechRepublic
Poland Hungary Thailand Philippines Egypt Ukraine Bulgaria Brazil Vietnam Romania Turkey SouthAfrica
Competitive Index of Countries – Engineering Services(Present)
Com
petit
ive
Inde
x*
* Competitive Index based on a range of 0 – 7 (0 – Minimum, 7 – Maximum)
Note: Scores for countries are based on scores for components in Country Assessment framework
Source: BAH analyses
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…but others are catching up
Competitive Index of Countries – Engineering Services(2015)
* Competitive Index based on a range of 0 – 7 (0 – Minimum, 7 – Maximum)
Note: Scores for countries are based on scores for components in Country Assessment framework
Source: BAH analyses
0
1
2
3
4
5
6
China India Russia Mexico Thailand CzechRepublic
Poland Philipp. Hungary Egypt Ukraine Bulgaria Brazil Romania SouthAfrica
Vietnam Turkey
Com
petit
ive
Inde
x*
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Questions for the panel
What is the future of off shoring of engineering services to India
What are the challenges that you have experienced in off shoring
Are there differences in challenges when dealing with vendors vs. captives
What are the most attractive attributes of vendor, and captive
11
22
33
44
Which countries are you looking to source the technical services from – apart from India
55
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Q & A