Dr. Keshab Panda Chief Executive, L&T Integrated...
Transcript of 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
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� 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...
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� 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...
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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
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Metamorphosis of Indian Economy
Source : Reserve Bank of India
Mirroring the industrialization of the economy, share of industry and services has been consistently increasing
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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)
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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
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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
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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?
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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
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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
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� 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...
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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
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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
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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
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� 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...
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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
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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%
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THANK YOU