Indian product engineering companies zoom amid IT slowdown – Times of India

BENGALURU: While IT services slowed down in financial year 2022-23 and sharply so towards the end of the year, the year was a robust one for pure-play engineering services providers. KPIT Technologies’ revenue grew 36. 7% in constant currency, Cyient Services’s revenue grew 30. 2%, and that of Tata Elxsi grew 24. 9%.
Analysts who track the product engineering space say the segment is in a bright spot. Ray Wang, CEO of Constellation Research, said the demand to digitise products and monetise them is driving the growth for these companies. “Manufacturers realise they have to digitise in order to succeed. Retailers realise they need digital experiences. Governments are moving to improve citizen services. Everyone needs product engineers,” said Wang.
Pareekh Jain, CEO and lead analyst at Pareekh Jain Consultancy, said the need for product engineering in the automotive space, like the deals KPIT Technologies bagged from Honda and Renault, is the key driver for the growth of some of these companies and that will continue into this year. KPIT Technologies recently signed a deal worth $250 million with Honda, and a $100-million deal with Renault to work on their software-defined vehicle programmes. Any deal above $50 million is considered a large one in the engineering services space.
“R&D is about 5% of salesof traditional auto firms, while those like Tesla invest a much higher percentage. To compete against the likes of Tesla, traditional firms need to increase their R&D budget. But in the last couple of years, auto companies’ sales are down, so their R&D budgets are down. But the need to spend is more, so auto firms are outsourcing it to these tech companies,” Jain says.
Tata Elxsi in March signed a contract with Alps Alpine, a leading Japanese manufacturer of electrical components and in-vehicle information systems, to establish a global engineering centre at in Thiruvananthapuram. While KPIT has predicted a growth of 27-30%, Cyient Services has said it expects to grow by 15-20%. That is way more than what IT services companies have forecast for the year.

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