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Title: UKTI%20Aerospace%20Sector%20Short%20Term%20Business%20Attachment%20-%20India


1
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2
UKTI Aerospace SectorShort Term Business
Attachment - India
  • 2nd Monthly Report
  • By Jaimie Rogers

3
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.

4
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

5
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.

6
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.

7
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.

8
Opportunities
Increasing Complexity of Work
9
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.

10
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.

11
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.

12
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
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