The joint report, ‘Seizing the ER&D Advantage – Frontiers for 2030,’ delves deep into the factors influencing the ER&D sector’s path to 2030. It highlights five key trends propelling its growth: Digital Engineering, Climate & Sustainability, AI Augmentation, Service Orientation, and Population and Skill Inversion.
In the face of significant technological shifts in critical industries, investment in Engineering, Research and development (ER&D) has become essential.
The global ER&D sector is on track for major growth, with projections showing an increase from roughly USD 1.5-1.8 trillion in 2023 to USD 2.5-3.3 trillion by 2030. This represents a strong compound annual growth rate (CAGR) of 8-9%. India, a leading hub for ER&D outsourcing, spent around USD 44-45 billion in 2023 and is predicted to continue its dominance, with spending expected to hit between USD 130 billion and USD 170 billion by 2030.
The ER&D sector’s opportunities and challenges are ever-changing. Currently, the emphasis on ER&D is not just a preference but a requirement. The surge in global ER&D spending is influenced by factors such as global talent accessibility, the quest for greater agility and scalability, and cost-saving measures. This growth presents numerous opportunities for industries and economies globally.
A joint report by NASSCOM and BCG, named ‘Seizing the ER&D Advantage – Frontiers for 2030,’ deeply explores the forces moulding the ER&D sector’s future. The report covers global ER&D spending, influential trends, leading growth sectors, and more.
The report also emphasizes India’s potential to become a global ER&D powerhouse. Insights from a survey of over 280 executives across nine sectors reveal perspectives on ER&D intensity, preferred outsourcing locations, challenges in outsourcing ER&D, and in-demand skills for the next 5-7 years.
A central theme of the report is India’s role in the Business ER&D sourcing market by 2030. India’s vast engineering talent and established relationships through prior engagements position it for a promising future in this domain.
By 2030, India is expected to increase its Global ER&D sourcing market share to 22%, up from 17% in 2023. This growth is attributed to factors like favourable demographics and the need for India to promote its ER&D capabilities. The nation that can adapt and enhance its services, such as upskilling in digital engineering or acquiring specialized skills like electric vehicle platform development, will secure a larger share of future investments.
Key Findings:
- Post-pandemic, global ER&D spending has seen a CAGR of 7%-8% from 2020 to 2023.
- Trends like Digital Engineering, Climate & Sustainability, AI Augmentation, Service Orientation, and Population and Skill Inversion drive growth.
- The leading sectors for this growth are automotive, healthcare and medical devices, and energy, utilities, oil, and gas.
- By 2030, healthcare and medical devices, automotive, and telecommunications are expected to account for about 50% of global ER&D spending.
- Besides the US, significant ER&D spending regions in 2023 include Japan, South Korea, Germany, France, the UK, and the Nordics.
- Total ER&D Sourcing is anticipated to grow from USD 210 billion-280 billion in 2023 to USD 600 billion-770 billion in 2030, driven by the need for cost-effective talent and scalability.
- India’s ER&D sourcing spending was USD 44 billion in 2023, with projections of USD 130 billion in 2030. However, countries like Thailand, Malaysia, Poland, Colombia, and Bulgaria are emerging as competitors.
- For India to succeed, a detailed strategy is required, including infrastructure and policy support, branding and promotion, and a focus on skilling and research.
