‘Indian market is ripe for consumption’

One of India’s leading global product design services and solutions company, Einfochips, opened its latest research and development centre in Bangalore on Thursday. Praful Shroff, CEO EInfochips, spoke to Supriya Ghorpade about India’s growing importance as a key player in the industry and the emerging trends to watch out for.

Tell us a little about the journey of Einfochip
The company started in 1995. We have around 750 people working for us. But unlike other companies, we are focused on product design and development services, or the Outsource Product Development (OPD) market. This means that the product companies outsource the development of products, which include the product design or maintenance of products, QN testing, releasing into the field etc. For example, we develop products like digital video recorders, which require knowledge about the firmware, software and hardware etc. This is our mainstream business.

You place a lot of emphasis on research and development
All our work is basically engineering development, so almost everybody is involved in the development of the products.

How many centres do you have?
We inaugurated our Bangalore R&D centre last week. We have offices in Ahmedabad, Pune, Chennai and now in Bangalore. Overseas, our headquarters is in Sunnyville, California, USA. We also have offices in Japan, Taiwan and UK.

Over the past decade the industry has developed a lot. What are the changes that you are seeing?
The fundamental change is that 10 years ago, a lot of companies came to India because of cost arbitrage. The costs have been escalating ever since. However, in the process, a lot of multinationals have put up their design centres here. For example, companies like Cisco, Samsung, LG Electronics and Intel have got large engineering R&D presence here and are involved in product development. Product development is essentially categorised into two types of markets: one for the Indian customers as the products require a lot of fundamental changes for localisation, and the other is the requirement for products at a global level.

Gradually companies have started doing product development in India, both for the Indian and global markets. India is emerging as a global hub for the eastern half of the world, and therefore there is a requirement for the product development. I think this decade we will see a phenomenal rise in that.

Why is it that India is increasingly becoming the popular choice?
There are several drivers, the first one being the talent pool. Compared to places like Romania and Ukraine, the scalability is here. Second is the Indian economic growth due to which companies are seeing huge potential in the Indian market. In the electronic product development, the major growth drivers are going to be the government policy. It is adding incentives like ESDM (electronic system design and manufacturing) to change the design and manufacturing sector in India.

In terms of your competitors, would you say you are well positioned?
We are much better positioned because a lot of companies are positioned in the IT services market. They do a lot of product engineering, but that is around 10-20% of their revenue; in our case its 100% of our revenue, which is a major differentiator. Secondly, unlike most companies, 70% of our revenue stream comes from the development work, while for other companies it comes predominantly from QN testing and maintenance.

Which are the verticals you are seeing maximum traction in?
From both global and domestic market, I think the consumer market is really heating up. Avionics is another key area. In APAC, people are busy buying planes, both private and commercial, so there is a lot of scope for business in this area. We see a lot of product development opportunities from aerospace and defence sector. These areas are really experiencing strong growth and we are playing in all these.

How different is the Indian market compared to the West, in terms of the demand for products?
I think the Indian market is very ripe for consumption, electronic consumer items particularly. There is a pent up demand. Same with automotive sector.

What are your expansion plans?
Last year, we grew by 30%. We have been growing between 30-40% every year. We want to better that. We should grow by 50% next year, and add another 300 engineers!

Who are your customers?
If you look at our top 15 customers, they are all over $5bn corporations, including Texas Instruments, GE, Cisco, and Samsung.

What are the trends in the industry?
Ten years ago, the decision about outsourcing was made by the US offices. Now, it is being made by the Indian design centres, which is a fundamental change. In the last decade, credibility was low, today it’s much higher. A lot of decision making and leadership has shifted to India in a major way over the past few years.