Dr.

Keshab Panda Chief Executive, L&T Integrated Engineering Services (IES) Larsen and Toubro Limited

November 17th, 2009

My Points of View...

Global Market Forces Impact of ESO clients value chain

Critical Success Factors ESOs alignment for success

Positioning Indias Engineering Capabilities ESOs strengths

Driving Engineering Value Collaborate to scale-up

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My Points of View...

Global Market Forces Impact of ESO clients value chain

Critical Success Factors ESOs alignment for success

Positioning Indias Engineering Capabilities ESOs strengths

Driving Engineering Value Collaborate to scale-up

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World GDP : 2009 Vs. 2014

2009 Population 738 Millions Population 307 Millions 2009 USA -2.73 % 2009 EU -4.19 % 2014 China +9.51 % 2009 India +5.36 % 2014 India +8.08 % China +8.50 %

Population 1,331 Millions Middle Class: 650-700 Millions

2009 Japan -5.37 %

2014 2014 USA +2.13 % EU +2.54 %

2014 Population 128 Millions Japan +1.79 %

Population 1,171 Millions Middle Class: 350-500 Millions

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Source : International Fund Data & Population reference bureau

Metamorphosis of Indian Economy

Mirroring the industrialization of the economy, share of industry and services has been consistently increasing

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Source : Reserve Bank of India

Survival of US & European Industries (An Example- Engineering Procurement & Construction Projects)

Typical Project Cost Structure

Typical EPC Project Quoted from Europe / US Material Project Engineering Civil Works Field Services (E&C) Total 60 5-10 12-15 20 100 Typical EPC Project Quoted from India 75 1-2 12-15 10 100

Typical Rates
Project Engineering / Commissioning Rates Europe Americas
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Germany & Switzerland US & Canada

Euro 80/manhour US $ 100-120/manhour

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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..

New Entrants
Threat of New Entrants Bargaining power of Buyers

Suppliers
Bargaining power of Suppliers

Industry Competitors (ESO Clients) Intensity of Rivalry

Buyers

Threat of Substitute

Substitutes

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Source : Porters Five Forces Model

In the borderless world... Opportunities galore... Challenges tougher... Resources limited... Times compressed...

Opportunities
New Products Greater Volume Broader Price Points Lower Cost Resources Larger Capital Pool More Resources

Challenges
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 . . . 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...

Competition product intelligence

Outsource?

Supply market management competitive differentiation?

Buyer behaviors

Product Development

Product Engineering

Purchasing Planning Manufacturing

Distribution & Logistics

After-Market Management

CRM

Information Systems and Business Process Management

Enterprise Support and Management

Research and Development what is core?

Outsource?

Capital mobilization and risk management Buy Vs. Own

Talent development where is the competitive advantage?

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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

Purchasing Planning Manufacturing

Distribution & Logistics

After-Market Management

CRM

Product Specification

Concept Design

Detail Design

Prototype Build

Test

Production Launch

Sustenance Engineering

Concept Sketch

CAID 3D Modeling

Clay Model CAE Build Planning Drafting/ Detailing Vendor Coordination NDT Assembly Field Test Assembly Manuals Engg. Change Assembly Line Value Engg. Product Improvement

Correlation with CAE Production Tooling

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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

Product Specification

Concept Design

Detail Design

Prototype Build

Test

Production Launch

Sustenance Engineering

LEVERAGEABLE Resources
Competitive Advantage Ownership Of Resources

Selective Ownership

CORE Resources

Stages of Value Chain

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My Points of View...

Global Market Forces Impact of ESO clients value chain

Critical Success Factors ESOs alignment for success

Positioning Indias Engineering Capabilities ESOs strengths

Driving Engineering Value Collaborate to scale-up

Confidential | Copyright L&T IES

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ESO providers ability to provide competitive differentiation across various dimensions of Client Product Development Needs are critical for their success...

Nurture IP Flexibility Standardization

Risk Mitigation

Global Product Development

Local Adaptation

Leveragability Control on Five Forces

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Differentiation

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Our Experience . . .

Nature of Services
Medical Devices Manufacturing Co.

Client Owned

Outsourced Services
Turnkey Product Development Contract Manufacturing Management Concept to commissioning Global Standardization Modularization

Design to Manufacturing Global Product Development

Product Definition Concept Inputs Product Distribution and Support

Liquids/ Powders Processing Company

Concept to Sustenance Engineering Global Plant Engineering Product Design to Testing Global Product Development Process Definition Equipment Procurement Material Selection Design Manufacturing Supply Chain Management Market management

Rubber Products Manufacturing Co.

Material Testing Detailed Design Product Testing Competitive product analysis Reverse Engineering
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Co-existence Engagement Model between L&T and Clients Captive

A Global Customer
Division-1 CLIENTS DIVISIONS & BUSINESS UNITS Relationship (Yes / No) Client satisfaction (Yes/ No) Support Areas & Services Data Conversion / Translation / Porting Sustances IME & EC Jobs E E E OP E E OP E CE CE OP CE OP E E CE OP CE E E OP CE CE OP CE OP E OP CE E CE OP OP OP CE CE OP CE OP OP OP E OP CE OP OP OP CE CE OP CE OP OP OP CE OP CE E OP OP CE CE OP CE OP E OP CE OP CE OP OP OP CE CE OP CE OP E E CE OP CE E OP OP CE CE OP CE OP BU-1 BU-2 BU-3 BU-4 BU-5 BU-6 BU-7 Division-2

NPD (Design, Protos & Testing Support) Tech Publication Certification Support NSF, CSA, UL & CE Analytics FEA & CFD

Configurators & CAD/ Design automations VA-VE Glocalization Prototype Dev & Testing Services EPO (Sales Enq-Order -Del process Mgmt) Component Sourcing Manufacturing Engg Support

OP

Existing Engagement

OP

Opportunity Exist

CE

L&T & Client Co-Exist 14

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My Points of View...

Global Market Forces Impact of ESO clients value chain

Critical Success Factors ESOs alignment for success

Positioning Indias Engineering Capabilities ESOs strengths

Driving Engineering Value Collaborate to scale-up

Confidential | Copyright L&T IES

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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

ESO s Knowledge base of Global Engineering needs Acquisition of global companies Ownership to product development Development of products for local & global markets International company transplants Increased JV in private sector Return of Ex-pat Technologists Increased foreign company investments Technology Outsourcing Captive Centers

Government R&D and Enterprises International tie-ups Licensed Public Sector technology transfers Selective Foreign company investments 1950
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1990

2000

2010

2020
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India dominates the talent pool needed for the off-shoring sector

Aggregate Suitable* Graduate Talent Pool for Offshore ES & BPO

18 Other low wage countries 16% Indonesia 3% Mexico 4% Brazil 4% Poland 4% Thailand 5% Turkey 7% Russia 10%
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India 28%

China 11%

Philippines 8%

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* Graduates with skills for direct employment in IT/ BPO (does not consider willingness and accessibility of telent Source: Nasscome reports, Booz & Company IC

THANK YOU

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