dr. keshab panda chief executive, l&t integrated...

November 17th, 2009

Dr. Keshab Panda

Chief Executive, L&T Integrated Engineering Services (IES)

Larsen and Toubro Limited

Confidential | Copyright © L&T IES 1

� Global Market Forces – Impact of ESO clients’ value chain

� Critical Success Factors – ESOs’ alignment for success

� Positioning India’s Engineering Capabilities – ESOs’ strengths

� Driving Engineering Value – Collaborate to scale-up

My Points of View...


World GDP : 2009 Vs. 2014……

Source : International Fund Data & Population reference bureau

USA-2.73 %

USA-2.73 %

2009 EU

-4.19 %

EU

-4.19 %

China

+8.50 %

China

+8.50 %

India+5.36 %

India+5.36 %

Japan-5.37 %

Japan-5.37 %

USA

+2.13 %

USA

+2.13 %

EU

+2.54 %

EU

+2.54 %

China

+9.51 %

China

+9.51 %

India

+8.08 %

India

+8.08 %

Japan

+1.79 %

Japan

+1.79 %

2009

2009

2009

2009

2014

2014

2014

2014

2014

Population

307 Millions

Population

307 Millions

Population

738 Millions

Population

738 Millions

Population

128 Millions

Population

128 Millions

Population

1,331 Millions

Middle Class:

650-700 Millions

Population

1,331 Millions

Middle Class:

650-700 Millions

Population

1,171 Millions

Middle Class:

350-500 Millions

Population

1,171 Millions

Middle Class:

350-500 Millions


Metamorphosis of Indian Economy

Source : Reserve Bank of India

Mirroring the industrialization of the economy, share of industry and services has been consistently increasing


Typical Project Cost Structure

Typical EPC Project Quoted from Europe / US

Typical EPC Project Quoted from India

Material 60 75

Project Engineering 5-10 1-2

Civil Works 12-15 12-15

Field Services (E&C) 20 10

Total 100 100

Typical Rates

Project Engineering / Commissioning Rates

Europe Germany & Switzerland Euro 80/manhour

Americas US & Canada US $ 100-120/manhour

Survival of US & European Industries(An Example- Engineering Procurement & Construction Projects)


ESO providers’ clients competed profitably, thus far, with a fair degree of control in their dominant markets.. Balancing the market forces at play..

Source : Porters Five Forces Model

New Entrants

Substitutes

Suppliers

Industry

Competitors

(ESO Clients)

Intensity of Rivalry

Buyers

Threat of New EntrantsBargaining power of Buyers

Threat of Substitute

Bargaining power of Suppliers


Opportunities Challenges

• New Products

• Greater Volume

• Broader Price Points

• Lower Cost Resources

• Larger Capital Pool

• More Resources

• Increased Competition

• Complex barriers for entry

• Increased risks

• Supplier bargaining Power

• Buyer bargaining power

• New Entrants

Companies can no longer afford complete ownership of all resources . . .

In the borderless world... Opportunities galore... Challenges tougher... Resources limited... Times compressed...

But, need more resources to meet demand in time


ESO services providers’ clients are transforming the ownerships of their value chain, that are being redesigned to compress “time to value”...

Enterprise Support and Management

Information Systems and Business Process Management

Product Development

Product Engineering

PlanningDistribution

& Logistics

CRMPurchasing

Manufacturing

After-MarketManagement

Competition

product

intelligence

Buyer

behaviors

Research and

Development –

what is core?

Outsource?

Supply market

management -

competitive

differentiation?

Capital

mobilization and

risk management

– Buy Vs. Own

Talent development

– where is the

competitive

advantage?

Outsource?


Product Specification

Concept Design

Detail Design

PrototypeBuild

TestProduction Launch

SustenanceEngineering

Clay Model

CAIDConcept Sketch

Drafting/Detailing

CAE3D

Modeling

AssemblyVendor

CoordinationBuild Planning

FieldTest

Correlation with CAENDT

Assembly Line

Assembly Manuals

Production Tooling

Product Improvement

Value Engg.

Engg. Change

To build right products at right time, everything is on the table for ESO providers, but, have to deliver beyond cost... It is value-to-cost ratio... Reduced time-to-value... Increased service velocity on a global basis

Product Development

Product Engineering

PlanningDistribution

& Logistics

CRMPurchasing

Manufacturing

After-MarketManagement


Thereby increasing focus and ownership on core resources that provide them competitive advantage and greater degree of control on value

realization. The rest is leveraged from reservoir of global resource pool

CORE Resources

Selective Ownership

LEVERAGEABLE Resources

Competitive Advantage

Ownership Of Resources

Stages of Value Chain

Product Specification

Concept Design

Detail Design

PrototypeBuild

TestProduction Launch

SustenanceEngineering


ESO provider’s ability to provide competitive differentiation across various dimensions of Client Product Development Needs are critical for

their success...

Standardization

Local Adaptation

Differentiation

Control on Five Forces

Leveragability

Risk Mitigation

Flexibility

Nurture IP

Global Product

Development


Our Experience . . .

Nature of Services Client Owned Outsourced Services

Global Product Development

• Product Definition• Concept Inputs• Product Distribution and Support

• Turnkey Product Development

• Contract Manufacturing Management

Medical Devices Manufacturing Co. Design to Manufacturing

• Process Definition• Equipment Procurement

• Concept to commissioning

• Global Standardization• Modularization

Global Plant Engineering

Liquids/ Powders Processing Company

Concept to Sustenance Engineering

• Material Testing• Detailed Design• Product Testing• Competitive product analysis

• Reverse Engineering

• Material Selection• Design• Manufacturing• Supply Chain Management

• Market management

Global Product Development

Rubber Products Manufacturing Co.

Product Design to Testing


Co-existence Engagement Model between L&T and Client’s Captive

CLIENT’S DIVISIONS & BUSINESS UNITSDivision-1

Division-2BU-1 BU-2 BU-3 BU-4 BU-5 BU-6 BU-7

Relationship (Yes / No)

Client satisfaction (Yes/ No)

Support Areas & Services

Data Conversion / Translation / Porting E E E OP OP E E

OP

Sustances IME & EC Jobs E E OP OP OP OP E

NPD (Design, Protos & Testing Support) E CE CE E CE CE CE

Tech Publication OP OP E OP OP OP OP

Certification Support NSF, CSA, UL & CE E CE CE CE CE CE CE

Analytics FEA & CFD E E OP OP E OP E

Configurators & CAD/ Design automations OP E OP OP OP OP OP

VA-VE E OP OP OP OP OP OP

Glocalization CE CE CE CE CE CE CE

Prototype Dev & Testing Services CE CE CE CE CE CE CE

EPO (Sales Enq-Order -Del process Mgmt) OP OP OP OP OP OP OP

Component Sourcing CE CE CE CE CE CE CE

Manufacturing Engg Support OP OP OP OP OP OP OP

E Existing Engagement OP Opportunity Exist CE L&T & Client Co-Exist

A Global Customer


India has a reservoir of highly experienced engineers with global knowledge base, that provides a foundation for ESO services providers’ to

drive engineering value realization through global collaboration

• Government R&D and Enterprises International tie-ups

• Licensed Public Sector technology transfers• Selective Foreign company investments

• International company transplants• Increased JV in private sector• Return of Ex-pat Technologists• Increased foreign company investments• Technology Outsourcing• Captive Centers

• Acquisition of global companies

• Ownership to product development

• Development of products for local & global markets

1950 1990 2000 2010 2020

Knowledge base of Global Engineering needs

ESO s


India dominates the talent pool needed for the off-shoring sector

Aggregate Suitable* Graduate Talent Pool for Offshore ES & BPO

India28%

18 Other low wage countries16%

* Graduates with skills for direct employment in IT/ BPO (does not consider willingness and accessibility of telent

Source: Nasscome reports, Booz & Company IC

China11%

Russia10%Philippines

8%

Turkey7%

Thailand5%

Poland4%

Brazil4%

Mexico4%

Indonesia3%


THANK YOU

dr. keshab panda chief executive, l&t integrated...

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