Ujval Nanavati: Tell us about the kind of work the GE India Technology Centre does?
Alok Nanda: GE India Technology Centre is hosted by GE Global Research and we have about 200 scientists here working on long-term research. Additionally, all of the GE teams have their engineering teams co-located here, which makes the Centre’s strength something like 4,500. One sees a truly multidisciplinary environment where teams work in multiple sectors on engineering-driven system development. The sector focus of the teams includes most of GE’s businesses globally — aviation, healthcare, power (renewables and non-renewable), oil and gas and transportation. Fundamental research is another aspect that the Centre works on. Cross-functional research that spans sectors is the focus.
Thanks to the sheer breadth of work that is done here, the synergy created in such an environment is phenomenal.
India’s offshoring story started with low value-added services such as call centres and low-end business process outsourcing. How has the offshoring model evolved over the years?
Let me start by explaining how things have changed at GE India Technology Centre over these years. 18 years ago, 70% of GE India Technology Centre’s revenues came from the United States (US) and Western Europe. Now, 70% of the revenues come from outside the US and Western Europe!
More generally, cost arbitrage as an offshoring strategy just is not valuable anymore, not to the developed world and certainly not for India. Everyone has realised that Asia is the world’s growth engine and that a front-end presence here makes business sense. For this front-end presence, a local understanding is becoming more important. You cannot sit far away from the market and innovate. This has driven the need for local innovation centres and India’s proximity to growth markets – besides being the largest growth market itself – makes it an ideal choice for value-added and innovation-focused work.
How have multinational corporations approached this changing dynamic?
MNCs have a lot of background Intellectual Property (IP) to build on, thanks to many decades of investment in research and development. This early R&D gives them an advantage. Locating research centres in emerging markets build agility and local reach on top of this advantage. In some sense, the ‘local MNC’ is a winning combination. Everyone realises that it makes business sense to follow this approach.
The ‘local MNC’ is a winning combination
With so much innovation and high-end work happening around design and engineering in India, is high-end manufacturing the next logical step for us?
Absolutely. Several industry sectors already have large manufacturing bases in India. That will only grow. What we do not currently have is high-end manufacturing in areas like aviation or defence or precision work involving machining, forging, casting and those kinds of processes. That too is changing now with many more industries coming in.
It is a case of demand and supply. If the volumes in any market justify an extended presence, then people will invest in manufacturing facilities. Needless to say, the Indian market offers the volumes, but the business case is only strengthened by the growth prospects of India’s immediate neighbourhood. Moreover, we have true MNCs that are Indian. These companies also think of the world as their market when they design or innovate.
The Indian market offers the volumes, but the business case is only strengthened by the growth prospects of India’s immediate neighbourhood
India largely skipped manufacturing and transitioned directly from agriculture to services. Are we now on the threshold of transitioning directly into high-end manufacturing, skipping the low-end, screwdriver type of manufacturing activity?
This is already happening and will only expand with time. Second, there are emerging technologies where the whole world is only just starting out. If I were to cite an example, additive manufacturing, also called 3D printing, comes to mind. India has a unique opportunity to leapfrog and go into the forefront of such technology-driven manufacturing. If we make the right investments and have the right enablers, then we will not miss the boat on this trend and command a competitive position compared to the developed world. Scale, value realisation, and innovation in such areas will help both economic growth and job creation.
Coming to the role of government, many believe that the services sector in India has grown despite the government and not because of it. What kind of policy enablers will be required for high-end manufacturing to succeed? Or should we hope that the government stays away for the sector to grow?
The government certainly should not enter into running industry. However, the key difference between the services revolution and the next age manufacturing revolution is that the former was more human capital dependent while the latter will require significant investment in high-end plant and equipment. This was the key reason why services could grow without government intervention.
A perfect business case does not exist in advance. We need to be realistic about the kind of investment such activities will require. Public funding may be the most viable source. The deep pockets of the government are an enabler for high-end manufacturing. Frankly, that remains the only source for the enormous risk capital that will be needed. Hence, the government will have a strong role to play.
The deep pockets of the government are an enabler for high-end manufacturing. Frankly, that remains the only source for the enormous risk capital that will be needed
The important element in government involvement will, however, be that it should be done in a fair and equitable manner for it to be fruitful. Developed countries like the US, Germany, UK and Japan have very effective schemes for incentivising R&D and that is something India needed yesterday.
Job creation is clearly another upside that will result from expanding manufacturing. What challenges do you foresee in the availability of talent to fulfil our potential in this area?
The talent challenge in India is well known. A large portion of our engineering pool is either unemployable or requires significant retraining to be effective. If we are not deliberate about acknowledging this and doing something about it, then we will hit a bottleneck at some stage. We cannot manufacture talent, can we?
A large portion of our engineering pool is either unemployable or requires significant retraining to be effective, we cannot manufacture talent, can we?
Look at the recent mandate from the government on corporate social responsibility spending out of profits. We need something similar to the talent management side as well. The industry cannot wash its hands off the problem by continually saying “our engineers are unemployable”. A partnership between industry, academia and government is much overdue wherein a relevant and up-to-date curriculum prepares our graduates for the jobs of today and tomorrow.
GE has partnered with a select few technical institutes where we share projects and programmes. We go in and engage with the content delivery and encourage students to participate in business challenges, though I admit even we could do more.
Ultimately, just as with risk capital, a partnership between industry and government is essential even for overcoming the talent challenge if we are to realise our potential.
Alok Nanda is CTO, GE South Asia and CEO, GE India Technology Centre at Bengaluru. He leads the Centre to drive innovation for growth solutions that enable strategic business outcomes. He completed his MTech Mechanical Engineering – Design from Indian Institute of Technology, Bombay and BTech Mechanical Engineering from the Faculty of Engineering and Technology, Jamia Millia Islamia, New Delhi. Prior to joining the GE Group in 2000, he was a Scientist at the Defence Research and Development Organisation.