GE India Technology Centre was established in 2000. How has the journey been so far
From a legal entity stand-point, we actually started on June 8, 1999. I remember it well because it is my birthday as well. The journey has been fantastic on many counts: First the team; the team that we have put together has been very productive. They are recognised globally in the respective areas that they work on. They produce products that are present globally and they produce products for India. I think this is one of the pillars that the organisation stands onthis is more a foundational pillar.
In terms of being able to take the GE processes and really excel at those; and also being able to contribute while we are shaping up as a new companythat has been a fantastic journey as well. When I say shaping up as a new company, I am talking about how we have moved from focusing only on bottom-line but on the top-line as well. So generating new revenues means generating new products for emerging markets as well. So we are a critical component of the strategy. We provide access not only to this country, but to the region in terms of understanding the voice of the customer and developing technology which will feed the voice of the customer effectively.
In the third piece of the journey, if you look at customer connect, the ability of the teams to deliver products based on the field knowledge, based on the understanding of what could go wrong when delivering at the customer location. Those are the things that make research and development real.
If you have the right team working and excelling and delivering new processes for the need and connected to the customer, the outcome has to be what we need which is intellectual property and new products introduced into the market and people getting recognised for the work they do. That way the journey has been fantastic. Just to give you an idea, the GE parent company has filed 2,000 patents that have contributions from the India team; of which, 1,000 have been filed in the last three years. So if you see, from 2000 to 2013, first ten years 1,000 and in the last three years1,000, we are ramping up for good reasons.
What are the key factors behind Indias growing acceptance as an ideal R&D location
I think we have a journey to complete to becoming an ideal R&D base but there are a lot of things that are going really well for India. One is obviously like I said, the peopleaccess to talent has been GEs strategy. While other companies have set up their offices in India; most of them engineering centres, we believe that we were the first ones to bring in the research component to India. Long term research as part of the R&D setup is something that we did at the John F Welch Technology Centre and in fact we are the first in GE where we co-located research and engineering teams around us.
The other aspect is the DRDO kind of organisations that provide an ecosystem. It is an ambience where you are not an isolated R&D entity; you have people who talk the same language as you do. So the ability to attract the talent into your organisation is based on the nature of the work that you provide but there is a talent pool that is available. It also gives you the ability to collaborate and access each others labs and facilities.
Is cost arbitrage still the major attraction
So when we started, we said that access to talent is what we are looking for. If you look at the costs involved in R&D, we have invested $220 million to date on plant and equipment. We are going to invest $ 20 million each year for the next three years in plant and equipment. With 4,500 employees at GE JFWTC, we feel we have reached a place where we want to be. We are not looking at large numbers. The costs have several components which have similar connotation globally, so that should not be the strategy for setting up an R&D centre. It should be the access to talent and the compensation and benefits, we do have something in India which is quite significant, called EoP (effect on payroll) year-over-year.
Companies ought to build R&D capabilities locally in order to serve the Indian market...
We are doing 10% of the work for the Indian market and in my opinion, this can be more. The local market is vibrant; the consumer market is vibrant. There are markets which still need to grow; we do need to double the availability of power. If we want to grow as an innovative nation, we basically need 400 GW of power being delivered. We are at 200 GW where much of it is not running because of fuel availability. That market needs to become real; the need is there and the people are willing to pay for it but due to decisions that have not been taken, it is putting us back.
Similarly, if you look at healthcare, we are at 5% GDP spend and the developed economy is at 15% GDP spend. But an efficient and a good place to be is at 10% GDP spend. So again, there needs to be a good amount of investment, a good standard of care across segments. If you go to a Tier-I city top hospital the care is world-class and better but the standard of care drops as you go further into to the rural segment and the delivery there so that market needs to open up as well. While I agree that the consumer market is strong, significant research is required and it is important for India to become on top of the value chain. Those are really lagging behind and we cannot afford to be where we are.
What are the opportunities that you see in the Indian market
I will talk to you about energy and healthcare. I will start with energy because this is the fundamental currency for innovation. The markets are significant. There are 200 GW that need to be added. 200 GW in generation translates to $200 billion by using simple rule of thumb. In transmission and distribution, there is another $200 billion. So in total, that is a $400 billion market waiting to happen in the next decade. I think the need is now but you cant add it instantaneously so its a decadeso that is a huge market.
Now shifting to healthcarewe need to move from 5 to 10% GDP spend. Here there is a big opportunity you will have to double up the market, while the GDP might go up and down. Here what we are doing and what I think the need of the hour is affordable healthcare. The company has asked India and us to look at the globe and not only India and come up with affordable care thought processesdelivery models and equipment. What we are pursuing there is the ability to take Indias efficiency to countries like US and standard of care to India from countries like the US.
What will be your focus areas for the centre for the coming years
Energy and healthcare in the broad level and transportation are going to continue to be big areas. Aviation is another large team that we have. They deliver globally but the same engines are used in India as well. If you look at the research side, we are looking at developing new materials and alloys which can operate very close to their melting points and at the same time, they maintain structural integrity. This requires a lot of work in thinking about how right at the micro-structure the metals and alloys behave at the those temperatures all the way to thinking about cooling holes so that the ambient temperature is close to melting point and the metal itself is able to handle it.
This is some of what we do with materials and we take it to components where we are looking at extending the length of the blade for the wind turbinesmore like an extension, all the way to aircraft engines on the shape of the L coil, the composite blades used, that is, the fan that you see out of the aircraft. GE is the one that makes these composite fan blades and a good part of the team works on this as well. The smaller engines that go on 737s as an example are the engines that we have ownership on here. That will continue to strengthen as a focus.
So when you go to the system level, the ability to understand and execute smart grids and take transmission and distribution to the next level, ability to avail Indias software strength on the industrial internet side. The industrial internet is going to give in GEs thought processes where even at 1% productivity improvement, it is a $1 trillion opportunity. Just like the internet gave productivity improvement, connecting machines and making the individual machine almost like a computer and having the ability to deal with big data on the cloud and do the analytics is something that is excitingthis is another area that we are looking at.
Another area is distributed power; like I mentioned if we are not adding to the gridIndia is still adding independently in the most inefficient and non-clean way of doing it. We have a good position for products in the distributed power area.