Rebound of tech services & The age of ER&D

The global ER&D market is on a trajectory to surpass USD 3 Trillion by 2030, growing at an 8-9% CAGR from 2023-2030, driven by technological advancements such as AI, electrification and digital engineering, which are fostering innovation across sectors such as automotive, aerospace, semiconductors, and healthcare.

India is expected to command 36% of global ER&D sourcing spend by 2030, up from 30% in 2023. Indian Engineering Service Providers (ESPs) are capitalizing on a demographic advantage, skilled talent, and cost benefits to outpace global peers. Indian ESPs are moving up the value chain, leveraging advancements in IP creation, innovation, and partnerships across verticals like aerospace, semiconductors, and automotive.

Highlights

• Indian Digital Engineering Services and Engineering Research & Development (ER&D) companies, such as Persistent Systems, Happiest Minds, Tata Elxsi, Tata Technologies, and KPIT, are achieving higher valuations than their global counterparts. This is due to their rapid adoption of digital engineering, cost-effective skilled labor, and strategic investments in high-demand sectors like automotive and semiconductors, which position them as leaders in emerging technologies.
• Indian ESPs are outpacing those in Western Europe and North America due to their adept use of India's demographic advantage.
• Growth in the Indian ESP market is fueled by favorable regulations, a skilled workforce, and a 30-50% cost advantage, making India a preferred outsourcing hub. Indian ESPs are experiencing a rise in mergers and consolidations, especially in semiconductor and automotive, to strengthen critical industry capabilities and provide end-to-end solutions.
• Indian ESPs are shifting from specialized services to broad capabilities, enabling them to serve diverse industries with integrated, cross-domain engineering solutions.