HCL ENGINEERING AND R&D SERVICES

G H Rao

1 HCL Technologies Confidential Copyright 2016 HCL Technologies Limited | www.hcltech.com

 ENGINEERING SERVICES OUTSOURCING VS.
IT OUTSOURCING MARKET
Engineering Services IT Services
CTO Organization CIO Organization
Key Stakeholder
R&D, product development (Revenue) Internal IT organization (Cost center)

5-15% of revenues,
Intensity 3-5% of revenues
depending on the industry

Total Spend $ 1.4 Trillion Globally $ 2.2 Trillion Globally

Aero, Auto, Telecom, ISV/Online, CE BFSI, Retail, Telecom, Healthcare

Key Verticals
Technology product verticals (HW/SW) Applicable to all

Enterprise/Custom Applications
Typical Services Product Engg., Platform Engg.
services, Infrastructure services
Topline (Revenue impact) +
Impact levers Bottom-line (IT cost Optimization)
Bottom-line ( R&D cost optimization)

2 HCL Technologies Confidential Copyright 2016 HCL Technologies Limited | www.hcltech.com

 WHAT DO WE DO BUSINESS OF PRODUCT &
SERVICE R&D
Product Centric Service Centric Customer Centric

Company

Multi- Design
Channel Thinking
Width of
Physical Data
customer
& Online Security
experience
Social
Analytics
Platforms

Customer

Business Impact through Engineering is all about Accelerated product development

delivered at an incredible Value and enabled by the latest Technologies.
3 HCL Technologies Confidential Copyright 2016 HCL Technologies Limited | www.hcltech.com
 SOFTWARE IS BECOMING CRITICAL FOR REVENUE
IMPACT AND BUSINESS SUCCESS ACROSS INDUSTRIES
Software underpins nearly every function in every industry : McKinsey
Drivers Market Trends
Increase Digitalization of
The digital market is projected to grow from $540 B in 2013 to
Business leading to a
$944B by 2017 at a CAGR of 15% (Source: IDC)
exponential growth

Platform- Cloud, Data, Mobile, Social and Analytics is predicted

Companies are moving from
to dominate IT growth. Projected to grow 15% YOY and drive
Product to Platform
89% of growth in IT. (Source IDC)

Smart, connected, IoT are

212 B devices are projected to be connected by 2020 up from
driving growth in Industrial,
12.5B in 2010. (Source IDC)
Mfg., Auto

4 HCL Technologies Confidential Copyright 2016 HCL Technologies Limited | www.hcltech.com

 WHAT IS THE MARKET ENGINEERING SERVICES
OUTSOURCING

Pharma, Biotech,
Chemical

$2.2
Trillion

Global IT Spend

Source: NASSCOM Booz & Co. Global ER&D Indias Maturing Ecosystem, HCL ERS Analysis
5 HCL Technologies Confidential Copyright 2016 HCL Technologies Limited | www.hcltech.com
 INDIA ER&D SERVICES MARKET IS EXPECTED TO
GROW 13-15%, REACHING 37-45B BY 2020
As per NASSCOM,
India currently
captures a 28%
share of the
global offshored
ER&D, which is
expected to grow
to around 35% by
the end of 2020.

Source: NASSCOM Strategy& Indian ER&D Reaching Inflection Point, April 2014
6 HCL Technologies Confidential Copyright 2016 HCL Technologies Limited | www.hcltech.com
 WHAT ARE THE MARKET DYNAMICS
GROWTH DRIVERS
Focus on emerging markets and OEMs differentiating through
reverse innovation Software & Services
Shorter & Faster Access to Global
Cost Reduction
Product Lifecycle Talent Pool
Uncertain markets, Non-tech industries expanding
1 Changing 2 Changing through
3 Digital (SMAC, m/e-
contracting PLCs, Target Business commerce)
stiffer competition Markets Models

ESO Growth Drivers

Changing Changing Disruption of IoT across
4 5
Management Technology 6 7
industries, Connected
Practices Landscape ecosystem
Higher Usage of
Product Shrinking R&D Technology
Embedded
Localization
Post crisis- Flattening R&D
Budgets Convergence
SystemsHyper-convergence, Cloud based
intensities, to improve ROIs and
delivery, Embedded Analytics
Outsourcing
Source: ISG: Robust Growth for Engg. Services whitepaper

7 HCL Technologies Confidential Copyright 2016 HCL Technologies Limited | www.hcltech.com

 WHAT CREATES IMPACT
INDUSTRY LEADING CAPABILITIES
Flight Controls & Actuation | Cabin Electronics | IFE | Engine Implantable Drug Delivery System | Automated Personalized
& Control Systems | Sensors & Integrated Systems Sedation System | Diabetes Management

Smart sensors | Special Purpose Electronic Control Units Chassis | Power train | Body
Controllers | Process Controls Electronics | Active Safety | Telematics | Infotainment

Copier | Fax Machines | Printers | Scanners

SAN/NAS devices | Inter-connect Devices |
| Multi-function Peripherals |
Storage SW SRM, DRM, ILM
Point of Sale Terminals | Smartcards

Set-top Boxes | Cameras | Mobiles Networking Solutions | Mobile & Handheld |

and Tablets | White goods Unified Comm Solutions

Accelerated Product Development Reduced Testing Times Lower Engineering Costs

8 HCL Technologies Confidential Copyright 2016 HCL Technologies Limited | www.hcltech.com

 PRODUCT EXAMPLES

Car Infotainment systems We impacted 40% of the software Multi Function Printer Frugally
footprint one of the worlds engineered monochrome printer
largest airplane maker by with 30% cost saving using vertical
engaging with 7 tier 1 partners paper path movement

End-to-end product Completely configurable Implantable drug delivery

engineering all weather professional 4K-2K, 3D system for pain relief of
wireless equipment camera terminally ill patients

RF antenna designed by HCL orbited Mars in Mangalyan

9 HCL Technologies Confidential Copyright 2016 HCL Technologies Limited | www.hcltech.com
 WHAT ARE OUR INVESTMENTS TEST LABS

Mechanical verification, Prototyping labs

Prototyping &
Product Testing/ Environmental Test labs Value engineering labs
Low Volume
Manufacturing
capability.

10 HCL Technologies Confidential Copyright 2016 HCL Technologies Limited | www.hcltech.com

 WHAT ACCELERATES OUR SERVICES SOLUTIONS

IoT Product Test

Framework Intelligence Automation

Platform Intelligent
Sustenance Data Analytics
Acceleration
Engineering Work Bench
Suite

electronic
Intelligent Value Analysis
Device Automation
Tech Support & Value Engg.
Testing

11 HCL Technologies Confidential Copyright 2016 HCL Technologies Limited | www.hcltech.com

 WHAT ENSURES COMPLIANCE
OUR SYSTEMS & PROCESSES

CMMI Services L5 ERS LOB (OCT 2012)

Automotive ISO16949 (Feb 2010)
CMMI V 1.2 Level 5 (2011)

ISO 27001 (April 2007)

Telecom TL 9000 (Dec 2009)

CMMI Level 5 for one of the group (2005)

Aerospace AS 9100 (July 2004)
BS 7799:2002 (2002)
Medical ISO 13485:2003
(April 2004) ISO 9001:2000 (Oct 2001)

CMM Level 5 (May 2001)

12 HCL Technologies Confidential Copyright 2016 HCL Technologies Limited | www.hcltech.com

 WHAT IS THE OUTCOME
TOP 100 R&D SPENDERS AS CUSTOMERS

5 out of 6 in 6 out of 8 in 3 out of 3 in 6 out of 9 in

Aerospace & ISVs and Medical Industrial/
Defence Online Devices Machinery

10 out of 12 3 out of 4 in 5 out of 8 in 7 out of 17 in

in Telecom Semi Fab & Consumer Automotive
OEM Equip Electronics

54 of the Top 100 R&D spenders are our Customers

13 HCL Technologies Confidential Copyright 2016 HCL Technologies Limited | www.hcltech.com
 WHAT IS THE OUTCOME
B$+ ENGG. SERVICES REVENUE

Revenue
1,184
1,087

881
821
774

FY 12 FY 13 FY 14 FY 15 FY 16

14 HCL Technologies Confidential Copyright 2016 HCL Technologies Limited | www.hcltech.com

 WHERE ARE WE W.R.T. COMPETITION
#1 TIER 1 INDIAN ESPS
1184 HCL ERS
1087
881
Revenues in $M

809
689 676 649 714 715 714 781
535
246 279 305 331

CY13 CY14 CY15 CY16

Difference between HCL and nearest competitor, in $M

372 403 For last 3 years HCL ERS lead has

Revenue Lead

204 increased from $204 M (CY14-15) to

$403M (CY16-17) over its nearest
CY 14-15 CY 15-16 CY 16-17 competitor.
Source: Public disclosures - investor relations

15 HCL Technologies Confidential Copyright 2016 HCL Technologies Limited | www.hcltech.com

 WHERE ARE WE W.R.T. GLOBAL COMPETITION
IN TOP 5
Global ESP Revenue
1600 1574
1490
1400

1200 1112
Revenue $M

1087
1000 1038

800 718
714
600 586

400
2011 2012 2013 2014 2015

Source: Public disclosures, HCL ERS analysis HCL ERS

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 WHAT DO FOLKS SAY ABOUT US
CUSTOMER ACCOLADES

17 HCL Technologies Confidential Copyright 2016 HCL Technologies Limited | www.hcltech.com

 WHATS IN STORE AHEAD INTERESTING TIMES
Engineering spend is going to change drastically in next 10 years
Creating significant challenges for firms with sub-optimal engineering planning

Asset light technologies are creating more incremental value creating the need to
Service
R&D, Service pivot to service R&D
Product vs.
48% R&D, Firms with large legacy product R&D organizations will have to transition in a non
Service R&D
62% disruptive way
Kick starting Service R&D organization will need extensive collaboration
Product
R&D, Product
52% R&D,
38%

2015 2025

Technology breakthroughs create more sustainable competitive advantage in

hyper competitive markets
Disruptive vs
Incremental innovation is going to witness a budget squeeze thats going to impact
Incremental
existing user base satisfaction
Firms will have to find a way to do more with less to protect existing revenue

SOURCE: Strategy&, R&D Mag, HCL Analysis Type of R&D

18 HCL Technologies Confidential Copyright 2016 HCL Technologies Limited | www.hcltech.com

 IN SUMMARY HCL ENGG. AND R&D SERVICES

Horizontal and Vertical Services

40+ Years of Complex Engg. Experience

Semiconductors
Aerospace

Automotive

Medical Devices
Servers & Storage
Consumer Electronics

Office Automation
Industrial Mfg

Telecom & Networking

ISV and Online

Largest Indian Engineering Workforce

Only B$+ Indian Engg. Services Provider

Embedded Software Among the Top 5 Global ESPs

Hardware Engineering
Mechanical Engineering
300+ Global Customers
Product Engineering & Testing
PLM / PDM & MES
54 of Top 100 R&D Spenders are Customers

19 HCL Technologies Confidential Copyright 2016 HCL Technologies Limited | www.hcltech.com

 WHAT ARE WE DOING FOR GROWTH
LARGE DEALS

Managed
Vendor Consolidation Services for
using Risk Reward models specific Programs
/ Processes
Rebadging of
Workforce on Product Partnerships
Context specific of Matured products
Skillsets /
Technologies
Technology Partnerships of
Product Carve technologies with skill gaps
Outs of Legacy at scale
Products

20 HCL Technologies Confidential Copyright 2016 HCL Technologies Limited | www.hcltech.com

 WHAT ARE WE DOING FOR ACCELERATED GROWTH
M&A
Three Pronged M&A Approach

N i c h e Te c h M & A Growth Gap M&A

Acquisition for Skill Complementary Fitment
Enhancement Scale and Customer Acquisition

C2SiS VLSI Back End Design Geometric Auto, PLM,

Manufacturing Engg.,
Mechanical centric Products

Account specific M&A

Account specific capabilities

Trygstad

21 HCL Technologies Confidential Copyright 2016 HCL Technologies Limited | www.hcltech.com

 THANK YOU

22 HCL Technologies Confidential Copyright 2016 HCL Technologies Limited | www.hcltech.com