UKTI Aerospace Sector Short Term Business Attachment - India

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UKTI Aerospace SectorShort Term Business
Attachment - India

• 2nd Monthly Report
• By Jaimie Rogers

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Achievements

• Supported the EADS/ Airbus Low Cost
  Subcontracting Campaign Supplier Visits
• With my UKTI hat on this gave me the
  opportunity to visit 10 of the top Engineering
  Service Companies in India
• The main aim was to understand these companies
  capabilities
• See opportunities section of this report which
  provides an overview of this sector
• Appended to this report are my company visit
  reports
• Commissioned the update to the Genser Aerospace
  Report
• Draft to be completed by mid July (07)
• Final version by mid August (07)
• Regular progress reviews underway
• Visit to Delhi to see a number of companies and
  organisations. This visit had a number of aims
• Let UK Indian Government representatives know I
  was in country and the intent of my role
• Make UK company representatives aware of my role
  and also get their view on India and where
  opportunities/ gaps might lie
• Speak to Indian organisations companies, let
  them know my role get their view of the
  Aerospace Industry and where support is required
• The main focus was around the aviation sector.
  Most were very welcoming and provided insightful
  views on where there are gaps
• I will pull much of this together in my report on
  the Indian Aviation Sector
• Major action is to follow up with Confederation
  of Indian Industry regarding their programme of
  seminars. One seminar is focussed on aerospace
  manufacturing. This could be very good for a
  focused Mission in Oct 07, i.e. attending
  seminar, meeting companies, then visiting their
  facilities. I think ideal for UK SMEs.

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Achievements

• Companies and Organisations visited in the last
  month
• EADS supplier visits
• Infotech Infosys
• HCL Incat
• Quest TCS
• Altair Cades
• Wipro Satyam
• Delhi visits
• Jane Owen, Head of UKTI India Lee Griffiths-
  1st Secretary Defense Equipment Co-operation
  (Deso)
• Aajay Mehra - Managing Director Airbus South
  Asia Stephan Billep- EADS Head of India Liaison
  office
• Sanjay Bahadur- Kingfisher Airlines CCO Amitabh
  Khosia Executive Director Federation of Indian
  Airlines
• Srinivas Duvvuri - Bombardier - VP Rep
  India Mr K Gohain - Head of Director General for
  Civil Aviation
• R K Singh- Ministry of Civil Aviation (1st
  report to Minister) KV Kunhikrishnan
  Augusta Westlands General Manager India
• Sanjay Kumar CCO Indigo Airline Sujith
  Haridas - Director for Confederation of Indian
  Industry
• Kapil Kaul CEO Centre of Asia Pacific Aviation
• Aerologistics visits
• Tocol Enterprises Vijaya Metal Finishers
• Triveni Hi-Tech Titan Industries

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Actions in next month

• Attend the Paris Airshow
• Support 1 to 1 meetings
• Provide advice and consulting for UK SMEs looking
  to work with India
• Provide feedback to UKTI Glasgow on how the
  secondment is going and buy off of future plans
• Priority to see Hindustan Aeronautics Ltd. and
  Confederation of Indian Industries
• Set up programme of company visits over the
  reminder of my time in India
• Identify top companies and organisations in each
  Aerospace sector and group by geographic
  location.
• Genser, the consultants who are updating the
  Genser Report may also support some of my
  visits to help them gather data.
• The focus on company visits this month will be
  mainly manufacturing. The intention is my next
  report will focus on this sector
• Attend the Open Sky Summit in Delhi on the 3rd
  July. The focus being on issues within the Indian
  Civil Aviation sector. Also include further
  companies visits in the trip.
• Commissioning of a UK Aerospace Industry Brochure
  of Companies wanting to work with the Indian
  Aerospace Industry
• From my research to date, I do not see the
  benefit in producing this currently. My
  perception is that the Indian Aerospace Industry
  is very aware of UK capabilities. There is
  already an existing UK First in India brochure
  produced for Aero India 07, which I intend to use
  for The Engineering Design.In Conference Expo
  to be held in Bangalore 9-11 August. This has the
  2 key elements I think are required Firstly it
  has a section which looks at the big, headline
  grabbing activities that are going on in the UK
  currently, the projects and products that market
  UKAI to India. Secondly it has a listing of some
  of the UK companies wanting or already doing
  business in India. Adding a few more companies
  will add little benefit. What we need to see in
  UK companies coming to India to start
  relationships. The action is to produced an
  update for the next Aero India in 2009 which
  should include more UK companies and more on the
  marketing of UK Aerospace relating to India.

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Opportunities

• The Indian Engineering Services Sector
• The subcontracting of packages of engineering
  design work to offshore destinations is becoming
  more and more important as companies look to
  reduce costs and also meet offset obligations.
  For UK SMEs this is maybe something they do on
  their own initiative as part of their company
  strategy or because they are being driven down
  this route by an OEM. This is probably one of
  the biggest and most important sectors for the
  UKAI.
• The Growth of the Indian Economic in a nut shell
  - The Indian economy was given a huge boost
  during the build up to the year 2000 and the
  concerns in the IT industry over the Millennium
  Bug. Much of the work was undertaken in India
  where there was a large, low cost, educated work
  force. This not only kicked off the economy but
  also started their process revolution
• This ability to analysis and optimize is what
  India does very well. They take a process or
  application, break it down into very small,
  simple sections. Optimize each and when it is all
  linked back together they have generated a total
  optimized process. This demonstrates their
  ability to think innovatively within a process.
  What they tend not to be so good at is thinking
  outside the box i.e. non logical innovation,
  laterally thinking.
• The Growth in Indian Companies - This process
  revolution has lead to the creation of some very
  large Information Communication Technology (ICT)
  Companies, who are now global players such as
  TCS, Infosys, Wipro, Satyam HCL. These
  companies strengths are their ability to
  understand the tools and processes they work with
  and their delivery capacity. What they currently
  trying to gain is aerospace engineering
  experience.
• There are also a number of other companies in the
  young Aerospace Engineering Services Field, such
  as Cades, Incat, Quest ProSim whose background
  is engineering. This maybe automotive, general
  engineering, power, rail or marine/ offshore.
  Although they have engineering background, the
  kind of work they have undertaken in these field
  still tends to lean towards the IT support side.
  So once again these companies are looking for
  Aerospace experience.
• Aerospace Experience - With both the ICT and the
  engineering based companies their aerospace
  groups are still a relatively new. Cades are the
  oldest, formed in 1997. Most are only 2 to 5
  years old.
• Aerospace experience is what differentiates
  companies. They are all chasing experience
  either through the work they are undertaking or
  through recruitment. There are a number of
  retiree consultants who now work for these
  companies from Hindustan Aeronautics Ltd and
  National Aerospace Laboratories. Some are also
  recruiting retirees from Western Companies. Some
  have formed strong relationships/ engineering
  centres with Western Aerospace Companies e.g.

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Opportunities

• Quest Rolls Royce Magellan
• HCL Finmeccancia Smiths Aerospace
• TCS HAL
• Infotech GKN Pratt Whitney Boeing
• Infosys Spirit AeroSystems Triumph Group
  Alstrom
• Cades Butler International Cebenetwork
• Initially this work will be very low end,
  repetitive stuff but as confidence grows more
  technical work is being undertaken offshore in
  India. It is still remains the simpler work.
• Of the companies visited there was a wide range
  of aerospace experience. Some have undertaken
  large packages of work or are doing ongoing work
  with international aerospace companies. The other
  end of the scale is where they have modified some
  software on an aerospace CAE tool or supported
  CAE applications on aerospace programmes. The
  experience drops off pretty quickly after the top
  5 companies.
• What an Indian company claims it can do needs to
  be fully interrogated and challenged through
  visits to their premises. Their skills and
  expertise span out from those developed from the
  ICT sector. All companies will do software
  development but very few have experience in
  stress hand calculations. The diagram on the
  following page gives an indication of the spread
  of skills that Indian Engineering Service
  Companies are currently capable of undertaking.
• Whats in it for them- Why do these organisations
  what to get involved in aerospace? Firstly the
  large financial returns possible. Secondly
  prestige. Aerospace sits well in their portfolio
  of work and the Indians do like to be associated
  with large international companies. It also gives
  their other groups more credibility. In most
  cases aerospace is still a small part of large
  organisations. They can afford to invest heavily
  in a relatively small group to get up to the
  necessary industry standards so they are able to
  take on work. Most are AS9100 approved, their
  offices are of good western standard and they are
  not short of the industry standard hardware and
  software.
• These companies are thinking longer term. Their
  investment in aerospace may not start to see
  returns for 5 to 10 years. These companies are
  cash rich. Investment capital is not an issue in
  India. They also make very (very) good profits on
  the work they undertake. Although they provide
  very good charge rates, by western standards,
  they still have significant profit margins built
  into their rates whilst ensuring they are still
  competitive. As the workforce becomes more
  experienced and salaries rise their overheads
  will increase but they have capacity to absorb
  some of it within their rates. As experience
  grows the hours to undertake work should also
  reduce.

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Opportunities
Increasing Complexity of Work
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Opportunities

• Charge Rates and Overhead Costs
• Advertised company charge rates General spread
  of charge rates seen across the companies
• Designer 10.80 to 21.60 /hr depending on
  years of experience
• Stress 13.50 to 23.00 /hr depending on years
  of experience
• Hourly charge rates should not been seen as a
  deciding factor on company capability.
• Employee attrition and salary escalation are an
  issue although it has improved over the last 2
  years. There are lots of stories that the average
  time someone worked in the ICT sector was 6 to 9
  months before they moved on or the attrition
  rates in call centres was about 70. In the
  Aerospace this not the case. The average
  attrition rate stated was about 11.5, still
  quite high by European standards but companies
  are addressing it. Providing training and
  opportunities to undertake further academic
  qualifications such as Masters. They are also
  trying to provide better job satisfaction with
  far less data processing than in the ICT sector.
  Staff will still get attracted away from
  engineering into the ICT sector where salaries
  are on average higher According to the Times of
  India, 27 June 2007, 73 of ICT graduates start
  on somewhere between 2500 and 5000 per annum.
• Most of the big engineering service companies are
  based in Bangalore. The cost of land has doubled
  as Bangalore has expanded to 7 million people
  from just less than one million in 2000. The cost
  of commercial land is equivalent to 20 sq. ft.
  The cost of building is very low a guestimate
  would be ¼ the cost in the UK. Utilities are
  cheap. Hardware is also available cheaply with a
  lot of the it being manufactured and sourced in
  India. Little in the way of other capex costs,
  such as manufacturing machinery. Software
  licenses are the only cost I not sure the Indians
  can reduce but Im sure they will have struck
  deals with the distributors.
• Company Structures - The top ten companies have
  good logical Organisational Breakdown Structures.
  They have domain experts for their areas of
  interest. The large companies have someone who is
  responsible for delivery of all their projects.
  They use project managers to run packages of
  work, some might be the lead engineers as well,
  which may cause bottle necks. There big issue is
  the number of staff with only 1 or 2 years
  experience compared to the number of experienced
  staff, which may only be 5 years. The lower order
  companies tend to have a very poor ratio. One
  lead engineer to 20 or more inexperienced staff.
• Staff- All the companies staff are academically
  well qualified. All will have a degree, many a
  masters and there domain experts will probably
  have PhDs. In general a masters is the equivalent
  to a standard degree in UK. Many companies allow
  their staff to undertake training for
  qualifications such as masters but are now
  limiting places due to demand. The average level
  of training is 2 weeks a year. Most companies
  have a 3 to 6 month induction course when a new
  employee starts.

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Opportunities

• Tools- Most of these companies work with the
  industry standard tools for CAD, CAE, FEM, PDM,
  DMU. In some cases they may have experience of
  using company specific packages if they have
  undertake work for a major customer. They will
  invest in tools if commercially worth while
• Quality- All can talk extensively on quality and
  quality procedures, most of the top ten are
  AS9100 approved, as well as many other approvals.
  They have feedback and lesson learnt processes
  running, which because they have such a strong
  process driven culture they do use and learn from
  them.
• In terms of a quality deliverables these
  companies will learn quickly but there needs to
  be that good integration to ensure both parties
  understand requirements. - This is where a UK Co.
  need to invest effort to ensure the job is
  delivered to time and quality.
• Intellectual Property Rights (IPR) - In all the
  companies visited IPR was an issue that all had
  experience of dealing with. All had good data/
  information separation and also staff separation
  where appropriate. One learning point make sure
  that the contract/ agreement clearly states how
  IPR should be addressed if it is a concern. They
  will do it but only if asked.
• The Future- The speed at which these companies
  will gain experience in aerospace over the next 5
  years will accelerate due to these companies
  chasing it but also due to the fact that the
  International OEMs will put more and more work
  both direct and indirect to offshore for the cost
  advantage and offset obligations. India is seen
  as a good destination for off shoring they speak
  English no big cultural issues are IPR
  sensitive have a aim to please culture and the
  companies have good infrastructures and backing.
• All these companies have offices in the UK, which
  are mainly for marketing currently. Some do have
  a large presence in the UK and Europe with their
  staff supporting work on shore at customers sites
  e.g. TCS have a number of engineers support the
  Airbus design centre in Birmingham, They also
  have a very large team supporting Labinal on the
  electrical concessions in Toulouse. As more
  packages of work come for the UK it wont be long
  before some of these companies set up engineering
  design offices in the UK to provide better
  integration of this work. Satyam are on the verge
  of doing this. Infosys are looking to follow
  suit.
• As confidence grows in Indias abilities and as
  more Indian companies bid directly for work
  packages more work will be moved out of the UK
  direct to India. More international companies
  will develop long term relationships and set up
  MoUs and or engineering centres within these
  companies. Some of the large OEMs will open their
  own engineering centres in India, e.g. Rolls
  Royce already have to manage and integrate their
  work in India. Airbus EADS are doing so
  currently, where India companies will have large
  teams to integrate and support large packages of
  work.

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Opportunities

• Some Indian engineering service companies are now
  looking to partner with manufacturing companies
  so they can provide design build capabilities and
  offer amortization.
• UK SMEs strategy to work with Indian Engineering
  Service Companies
• Think long term. The first package placed will
  not give much cost savings due to start up
  issues. There will be some hard work to get it
  right, just like any work package offload. All
  Indian companies I spoke to usually expect to
  place someone from their company in the UK
  company at least for a period to pick up a
  package of work. Most have representatives in the
  UK who will act as an interface, attending
  meetings where required, usually at the outset
  and monthly reviews. If it is the very first one
  it may have to be for longer. Be prepared that a
  UK person will need to go to the Indian office
  for a period, especially for the first package.
  Regular trips, phone conferences and video
  conferences will also become part of the day job.
  All companies I interviewed seemed to be aware of
  how to project/ technical manage a package how
  to manage and resolve issues via reviews,
  escalation and using agreed assumptions.
• Think very carefully about what work to off shore
  to India. What Im not endorsing is moving work
  to India that will put people out of work in the
  UK. Rather, where it will benefit a UK SME. Yes,
  one of the major advantages is the cost benefit,
  but currently the work should in general still be
  the labour intensive, repetitive, low risk work,
  that will free up experienced personnel that can
  work on new design packages and new technology.
• Some of the work that these Indian companies are
  strong at are tech pubs, 2D drawing to 3D model
  conversion or from legacy CAD systems product
  weight optimisation CAE tool customisation.
  They all have a good set of industry standard
  CAE, CAD tools. There are opportunities for UK
  SMEs to utilise these tools especially where the
  SME does not have them themselves because they
  may not see these as on of their key competency.
• Their view is that the minimum size of package to
  see any real benefit should be 4-5 men for 4
  months i.e. 3000 to 4000 hrs. Once a package is
  complete long term support of 1 or ½ a FTE will
  also work. They do expect smaller packages of
  work to start the relationship with a company.
• Dont put different packages of work with
  different companies. Develop a relationship with
  1 or 2 and work with them and develop them. Start
  low risk. Put out some very simple work Data
  conversion, 2D work. Then build up size and
  complexity of work as confidence and the
  relationship matures. In general the work will
  always remain lower order work.
• Be aware of the issue of time and distance.
  Ensure requirements are very well defined in the
  contract and that the Indian team leader/s fully
  understand as well. This will be ongoing
  throughout the life of a project.

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Opportunities

• A number of European and North American companies
  have signed some type of MoU with India
  companies. There is no reason why a UK SME or
  consortium of UK SMEs (who may undertake work for
  the same OEM) could not do the same.
• Inward Investment into the UK- The other major
  opportunity coming from this sector in inward
  investment into the UK. All the top companies
  have offices in the UK. Currently mainly small
  offices for marketing. As the amount of work from
  the UK and Europe grows they will look to open
  bigger, technical offices in Europe to provide
  better integration of the work packages, i.e.
  have lead engineers and integration teams located
  close to their main customers. The UK need to
  ensure it becomes the home of these offices, not
  France or Germany. I suggest UKTI need to start
  direct contact regarding this with these
  companies. As I hold follow on meetings I am
  discussing this with their representatives, they
  realise this is a major marketing point for their
  campaigns in Europe.
• The reports of my visits to a number of the
  engineering services companies will follow in due
  course.
• Having seen first hand and now have a better
  understanding of this sector and capabilities, I
  have identified a number of other engineering
  service companies I intend visit
• ProSim
• BAEHal
• Geometric or Accenture