IT industry targets big bucks in auto market

As the global automobile market gears up to grab a pie of the booming auto sector in India, Indian IT companies like Tata Consultancy Services, Satyam, Infosys, KPIT Cummins Infosystems, Genpact and IBM India are eyeing the international auto market to provide solutions ranging from back-end support to providing operational excellence.

Leading automobile giants like General Motors (GM), Toyota, Ford, Daimler and BMW spend sizeable portion of their annual revenue on upgrading information technology (IT) support for supply chains, improving manufacturing quality, sales, marketing and distribution efficiency among some other segments.

Analysts say that the global automotive IT market could easily be in excess of $15 billion as companies like GM, Ford, Chrysler, Daimler and BMW each spend $2 billion on gaining software solutions, while many other non-OEM companies, including component makers and small suppliers, spend substantially on improving distribution networks with their clients.

Jayant V Pendharkar, head (global marketing), Tata Consultancy Services (TCS), said, "There is a lot of space for growth in the automotive sector for Indian IT companies, the market size is very huge. We have four big clients in this sector already and pitching for more."

Last year, the company generated sales of over $650 million from automotive segment alone, which was also 15 per cent of the company's total revenue of $4.3 billion for the year.

It also signed a multi-year contract worth almost Rs 500 crore with the US-based automotive company Chrysler for providing application maintenance and support services to the company. TCS is also catering to Ferrari in providing engineering services in developing the F1 car.

Pradeep Udhas, executive director (ITeS), KPMG, said, "The auto sector is only third to banking and insurance sectors in terms of size of spending power. The sector is growing 10 percentage points above any of the other sectors, that is the segment is booming at 30 per cent growth year on year."

Apart from TCS, Satyam Computer Services is also witnessing an increased activity in the automobile segment with double-digit revenue generated through it.

The company has set up a separate centre in Chennai which will undertake research and development activities for the automotive sector in the areas of alternative fuels, hybrid engines, virtual test drive solutions and emerging areas such as infotainment. It has even partnered companies in designing, prototyping and testing of vehicles.

Subu D Subramanian, director and senior vice-president, Satyam, said, "Globally, automobile industry is going through challenging times. While they need to come up with new features in short-time, they also have to reduce the time to market duration of new products. With this, the work that is coming to Indian IT services firms has also changed. It has shifted from providing maintenance and shopfloor automations to product development, designing and creating embedded solutions to implementation of product lifecycle management (PLM) solutions."

Almost 11 per cent of the company's revenue comes from the automotive vertical. Of this, close to 15-17 per cent comes from engineering processes, which include designing, product development and other high-end work.

While currently the US is the largest market for Satyam in the auto segment, Subramanian said that Asia-Pacific region is also growing fast along with Europe. "Surprisingly, France auto sector is opening fast, whereas Germany still remains to be a challenge," he added.

Girish Wardadkar, president & ED, KPIT Cummins Infosystems, said, "There is a substantial increase in designing and engineering services work coming to India. If you look at only this segment, then it has been growing at 50-60 per cent on an annualised basis. The other trend in the auto sector is the growth in general services like KPO, which includes operations like auto processes and approvals of loans. This has been growing at a rate of 30-40 per cent."

While in March 2006, the number of people working for the company on the engineering and designing work was 250-300, it has reached about 1,100 by the end of March 2008.

Analysts believe that one of the reasons for the engineering and designing work coming to India has been the change in the mindset.