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Indian defence gets Tech teeth
Indian IT majors expect megabucks to come their way as the country's armed forces reboot their operations.
As India negotiates big-ticket defence deals, excitement buzzes through the country's tech industry. There is a growing optimism that the massive acquisition of weapons and equipments like tanks, guns, missiles, ships, aircraft carriers, submarines, fighter aircraft, radars and surveillance systems will result in substantial business opportunities for them. The underlying thought is that while powerful weapon platforms are obviously necessary for military domination and deterrence, supremacy in the battles of the 21st century will hinge on sophisticated command, control and communications systems.
With their proven skills in software development, maintenance and systems integration projects, tech companies are looking to grab a significant portion of IT projects.
Business opportunity looks staggering. India will be offering large defense contracts worth more than $100 billion over the next 10 years, estimates a recent Confederation of Indian Industry-KPMG report. In addition, the country will spend $9.7 billion by 2016 on internal security alone. A quick sampler: India is holding field trials for the world's biggest arms deal in play, for buying 126 multi-role fighters in a $10.4 billion deal. Such high estimates from CII-KPMG are being seen as conservative by defence analysts.
They argue that India already spends more than $11 billion per annum annually on foreign military supplies and the defence budget is likely to continue its steady rise. Consulting firm Frost & Sullivan also estimates that the total spending for the Indian defence market will reach $36.2 billion by 2013, while the offset potential during the forecast period is expected to reach $10 billion.
Excitement for the tech industry comes from the fact that the country's armed forces will need sophisticated technology systems for managing various processes. Not surprising, IT firms like TCS, HCL Technologies, Wipro and Infosys are looking to grab work from the armed forces as they make efforts to develop their processes and become more efficient. Roger A Krone, president, Network and Space Systems, Boeing Integrated Defense Systems says, "The company is looking at long term market access and at India as a global supplier. We know that this is a great place to develop software. We are here to understand the capabilities of the software industry . We have ideas and I am sure we can at a later stage develop technology here."
In addition, the government is pushing its private defence sector with new policies making it mandatory for foreign firms to locally source bulk of arms sold to India. The government last year introduced a new rule that made it mandatory for foreign defence firms to buy 30% of equipment from local firms, but is now looking at gradually raising that figure to 70%. US aviation majors Boeing and Lockheed Martin have already begun sourcing equipment worth $950 million from local companies to sell to India.
The policy change also means that now even Indian companies will be allowed to bid for these contracts. Until now, only foreign companies could bid for the large defense deals, and the Indian companies were left to take up the contracts which involved non-combative equipment for the forces.
Predictably, defence could be the next boom for the IT industry. This is because today's armed forces require a multitude of capabilities, they need to be highly networked. Crucial here is the ability to conduct network-enabled operations, in which high-performance computer and communication systems link sensors, fires, formations and units. Combining information superiority with superior command and control and firepower, the resulting kill chain enables the military to respond appropriately to threats of all kinds. According to Mark JS Douglas, vice-president of the UK- based General Dynamics, the company has invested heavily in the last 15 years. "We are looking to grow and develop for long term and bring solutions, capabilities and technology for the benefit of the Indian systems," he adds.
Samtel Display Systems executive-director Puneet Kaura says, "The Indian defence technology market is extremely young, especially the private sector, which needs to quickly gear up to address the needs of the industry. Through the transfer of technology clause of the defence procurement programme, foreign vendors are obligated to bring in the latest technology into India. Eventually, all foreign vendors are looking at deriving the cost advantage by using India's manufacturing ability and labour pool."
Over the next few years, the introduction of a modern command information system will improve the Indian Army's ability to conduct network-enabled operations. E-maintenance of assets and material management are among the top projects currently at the Indian Army and Air Force. The significance of such projects is that it plays a key role in logistics maintenance and is vital for sustaining operational capabilities and material management. Both the forces are looking to prepare for changing dynamics of future warfare. For instance, enterprise resource planning (ERP) software will help them track and maintain the inventory, creating them more efficiently by responding to the changing needs of modern warfare.
The current profile of the equipment held by our forces highlights the need for modernisation. While India is currently the tenth largest defence spender in the world with an estimated 2% share of global defence expenditure, 70% of the equipment is imported and only 30% of equipment is being manufactured locally. Obsolete equipment currently accounts for 50% of the armoury. For instance, the Indian Army's communications systems are based mostly on obsolete technologies. Software-based radios and cognitive radios are not even being talked about.
Whereas globally, advanced systems such as a tactical communication system (TCS) for offensive operations and battlefield management system (BMS) for communication at the tactical level in defensive operations are the norm.
Nevertheless, leading Indian industrial houses such as the Tata Group, Larsen & Toubro, the Mahindra Group, and Kirloskar Brothers are diversifying into this sector by forming joint ventures with foreign companies on both strategic and product-specific bases. As on date, offset contracts worth Rs 7,500 crore have already been signed. In fact, the current year will see a major implementation of IT projects on the ground. Herein, small and medium IT companies have a good chance to be tier I/II suppliers for Indian original equipment manufacturers and may expect to earn significant revenues through defence supply with the right business strategy and investment in defence technology.
BAE Systems official spokesperson Guy Douglas says, "Offsets could bring in investment across all sectors of the defence industry. The key is in squeezing long term value out of these investments by ensuring that the business model survives beyond the life of the project from which the offsets originate." BAE Systems has a Bangalore-based IT/software joint venture with Hindustan Aeronautics, called BAeHAL. This provides IT solutions and services to aerospace, defence, transport and engineering industries. "IT capabilities in India match and often exceed capabilities elsewhere, and there is no reason to believe that this success could not be repeated in defence-related software and IT areas," he adds.
Dassault Systemes India president Andy Kalamb says, "The Indian IT sector is benefiting by leveraging Dassault Systemes PLM solutions to offer engineering services to both our local and global customers. Small and medium enterprises form a major market segment as they are a part of the value chain of companies which work with large OEM customers. We have close ties with many Indian companies which use our software to design, test and simulate equipment for all branches of the armed forces. These include the Tata group, L&T, JBM Group, Mahindra group and several public sector companies."
Rainer Farid, vice-president, sales and customer relations, South Asia, Eurocopter says, "We believe in outsourcing and Eurocopter has identified different packages in various areas. Currently we are in discussions with potential Indian partners and once we short list, we will evaluate them. For IT, we have different packages and soon we will be announcing those."
Typically, most companies in the aerospace and defence sectors engage in a business model where the OEM undertakes the role of component assembler and key suppliers become partners who manage the entire development and manufacturing of specific components.
Leading aerospace and defense majors are relying on product lifecycle management (PLM) solutions to address these challenges, harness expertise, and build closer relationships with their customers.
Tulip Telecom chairman and managing director HS Bedi says, "We are getting into the defence sector for the first time by offering battle management solutions." Recently, Tulip has tied up with Rheinmetall Defence to introduce INIOCHOS V, a vehicle command and control system in India. In near real time, the system depicts the position of friendly and enemy forces on a digital situation map, together with relevant operation plans. Rheinmetall Defence vice- president Siegfried Kroll says, "Rheinmetall is cooperating with numerous local defence contractors on projects to modernise the Indian armed forces."
AJS Walia, managing director, India and South Asia of Sikorsky Helicopter Company says, "We have entered into tie ups with a number of Indian IT companies like Infotech and TCS. There is enormous scope for business and there is a huge base of talent here. Sikorsky has decided to make India its hub in the future."
Despite the euphoria surrounding the big-ticket deals, India must skillfully leverage its buyer's clout to ensure that each defence acquisition contract results in the transfer of work and modern technology to Indian companies. This is necessary not only for computer and communication systems, but also for all other weapons and equipment so that the country's technological threshold is raised and gains for the Indian tech majors are effectively met.
Source: Financial Express
Indian IT majors expect megabucks to come their way as the country's armed forces reboot their operations.
As India negotiates big-ticket defence deals, excitement buzzes through the country's tech industry. There is a growing optimism that the massive acquisition of weapons and equipments like tanks, guns, missiles, ships, aircraft carriers, submarines, fighter aircraft, radars and surveillance systems will result in substantial business opportunities for them. The underlying thought is that while powerful weapon platforms are obviously necessary for military domination and deterrence, supremacy in the battles of the 21st century will hinge on sophisticated command, control and communications systems.
With their proven skills in software development, maintenance and systems integration projects, tech companies are looking to grab a significant portion of IT projects.
Business opportunity looks staggering. India will be offering large defense contracts worth more than $100 billion over the next 10 years, estimates a recent Confederation of Indian Industry-KPMG report. In addition, the country will spend $9.7 billion by 2016 on internal security alone. A quick sampler: India is holding field trials for the world's biggest arms deal in play, for buying 126 multi-role fighters in a $10.4 billion deal. Such high estimates from CII-KPMG are being seen as conservative by defence analysts.
They argue that India already spends more than $11 billion per annum annually on foreign military supplies and the defence budget is likely to continue its steady rise. Consulting firm Frost & Sullivan also estimates that the total spending for the Indian defence market will reach $36.2 billion by 2013, while the offset potential during the forecast period is expected to reach $10 billion.
Excitement for the tech industry comes from the fact that the country's armed forces will need sophisticated technology systems for managing various processes. Not surprising, IT firms like TCS, HCL Technologies, Wipro and Infosys are looking to grab work from the armed forces as they make efforts to develop their processes and become more efficient. Roger A Krone, president, Network and Space Systems, Boeing Integrated Defense Systems says, "The company is looking at long term market access and at India as a global supplier. We know that this is a great place to develop software. We are here to understand the capabilities of the software industry . We have ideas and I am sure we can at a later stage develop technology here."
In addition, the government is pushing its private defence sector with new policies making it mandatory for foreign firms to locally source bulk of arms sold to India. The government last year introduced a new rule that made it mandatory for foreign defence firms to buy 30% of equipment from local firms, but is now looking at gradually raising that figure to 70%. US aviation majors Boeing and Lockheed Martin have already begun sourcing equipment worth $950 million from local companies to sell to India.
The policy change also means that now even Indian companies will be allowed to bid for these contracts. Until now, only foreign companies could bid for the large defense deals, and the Indian companies were left to take up the contracts which involved non-combative equipment for the forces.
Predictably, defence could be the next boom for the IT industry. This is because today's armed forces require a multitude of capabilities, they need to be highly networked. Crucial here is the ability to conduct network-enabled operations, in which high-performance computer and communication systems link sensors, fires, formations and units. Combining information superiority with superior command and control and firepower, the resulting kill chain enables the military to respond appropriately to threats of all kinds. According to Mark JS Douglas, vice-president of the UK- based General Dynamics, the company has invested heavily in the last 15 years. "We are looking to grow and develop for long term and bring solutions, capabilities and technology for the benefit of the Indian systems," he adds.
Samtel Display Systems executive-director Puneet Kaura says, "The Indian defence technology market is extremely young, especially the private sector, which needs to quickly gear up to address the needs of the industry. Through the transfer of technology clause of the defence procurement programme, foreign vendors are obligated to bring in the latest technology into India. Eventually, all foreign vendors are looking at deriving the cost advantage by using India's manufacturing ability and labour pool."
Over the next few years, the introduction of a modern command information system will improve the Indian Army's ability to conduct network-enabled operations. E-maintenance of assets and material management are among the top projects currently at the Indian Army and Air Force. The significance of such projects is that it plays a key role in logistics maintenance and is vital for sustaining operational capabilities and material management. Both the forces are looking to prepare for changing dynamics of future warfare. For instance, enterprise resource planning (ERP) software will help them track and maintain the inventory, creating them more efficiently by responding to the changing needs of modern warfare.
The current profile of the equipment held by our forces highlights the need for modernisation. While India is currently the tenth largest defence spender in the world with an estimated 2% share of global defence expenditure, 70% of the equipment is imported and only 30% of equipment is being manufactured locally. Obsolete equipment currently accounts for 50% of the armoury. For instance, the Indian Army's communications systems are based mostly on obsolete technologies. Software-based radios and cognitive radios are not even being talked about.
Whereas globally, advanced systems such as a tactical communication system (TCS) for offensive operations and battlefield management system (BMS) for communication at the tactical level in defensive operations are the norm.
Nevertheless, leading Indian industrial houses such as the Tata Group, Larsen & Toubro, the Mahindra Group, and Kirloskar Brothers are diversifying into this sector by forming joint ventures with foreign companies on both strategic and product-specific bases. As on date, offset contracts worth Rs 7,500 crore have already been signed. In fact, the current year will see a major implementation of IT projects on the ground. Herein, small and medium IT companies have a good chance to be tier I/II suppliers for Indian original equipment manufacturers and may expect to earn significant revenues through defence supply with the right business strategy and investment in defence technology.
BAE Systems official spokesperson Guy Douglas says, "Offsets could bring in investment across all sectors of the defence industry. The key is in squeezing long term value out of these investments by ensuring that the business model survives beyond the life of the project from which the offsets originate." BAE Systems has a Bangalore-based IT/software joint venture with Hindustan Aeronautics, called BAeHAL. This provides IT solutions and services to aerospace, defence, transport and engineering industries. "IT capabilities in India match and often exceed capabilities elsewhere, and there is no reason to believe that this success could not be repeated in defence-related software and IT areas," he adds.
Dassault Systemes India president Andy Kalamb says, "The Indian IT sector is benefiting by leveraging Dassault Systemes PLM solutions to offer engineering services to both our local and global customers. Small and medium enterprises form a major market segment as they are a part of the value chain of companies which work with large OEM customers. We have close ties with many Indian companies which use our software to design, test and simulate equipment for all branches of the armed forces. These include the Tata group, L&T, JBM Group, Mahindra group and several public sector companies."
Rainer Farid, vice-president, sales and customer relations, South Asia, Eurocopter says, "We believe in outsourcing and Eurocopter has identified different packages in various areas. Currently we are in discussions with potential Indian partners and once we short list, we will evaluate them. For IT, we have different packages and soon we will be announcing those."
Typically, most companies in the aerospace and defence sectors engage in a business model where the OEM undertakes the role of component assembler and key suppliers become partners who manage the entire development and manufacturing of specific components.
Leading aerospace and defense majors are relying on product lifecycle management (PLM) solutions to address these challenges, harness expertise, and build closer relationships with their customers.
Tulip Telecom chairman and managing director HS Bedi says, "We are getting into the defence sector for the first time by offering battle management solutions." Recently, Tulip has tied up with Rheinmetall Defence to introduce INIOCHOS V, a vehicle command and control system in India. In near real time, the system depicts the position of friendly and enemy forces on a digital situation map, together with relevant operation plans. Rheinmetall Defence vice- president Siegfried Kroll says, "Rheinmetall is cooperating with numerous local defence contractors on projects to modernise the Indian armed forces."
AJS Walia, managing director, India and South Asia of Sikorsky Helicopter Company says, "We have entered into tie ups with a number of Indian IT companies like Infotech and TCS. There is enormous scope for business and there is a huge base of talent here. Sikorsky has decided to make India its hub in the future."
Despite the euphoria surrounding the big-ticket deals, India must skillfully leverage its buyer's clout to ensure that each defence acquisition contract results in the transfer of work and modern technology to Indian companies. This is necessary not only for computer and communication systems, but also for all other weapons and equipment so that the country's technological threshold is raised and gains for the Indian tech majors are effectively met.
Source: Financial Express
