The man who came from nowhere

A few decades may have passed, but BVR Mohan Reddy still remembers every single word that his structural engineering professor said during a particular class. Not surprising, as they have helped him build a world-class engineering solutions business.

“The professor started his class by saying, ‘Money lost can be earned back with effort; health, when lost, can be earned back with a lot of effort; but values, when lost, can never come back.’ Hence, I place a lot of emphasis on values, and this has translated into Cyient’s culture,” says 64-year-old Reddy, whose company is involved in almost every major aircraft design programme.

But having the right set of values is one thing, breaking into the almost impenetrable world of aeronautics altogether another. “When I started an engineering services company in 1991, many global companies were not ready to outsource engineering at that time,” says Reddy, who is also the chairman of software industry body Nasscom.

It still is not an easy sector to get into. Harish HV, Partner-India Leadership team at Grant Thornton India, points out: “Defence (where most of Cyient’s clients operate in) is a high capex, low volume, high research and development, and long cycle business, which is tough to break into and requires continuous efforts to sustain. This is different from businesses which Indian houses are used to, and the level of risk is therefore seen to be high.”

Reddy founded Hyderabad-based Cyient (formerly Infotech Enterprises) in 1991 after stints in the DCM Group, Mico Bosch, Hindustan Computers Ltd and the Voltas-promoted OMC Computers, where he was managing director. “I discovered a niche area in geospatial information systems, where we (Cyient) could offer our services. Our first offering was to convert physical maps into the digital format,” reminisces Reddy, who holds a graduate degree in mechanical engineering from the College of Engineering, Kakinada, and postgraduate degrees from the Indian Institute of Technology, Kanpur and the University of Michigan in the US.

“However, there were serious quality challenges due to lack of skilled and experienced resources. We put a lot of effort to build a world-class quality system, which became the very DNA of Cyient. After that, we delivered millions of hours of work without a single error.”

Cyient today has 12,900 associates working across 36 global locations. Its clients include 29 of the Fortune 500 companies, enabling it to earn revenues of about $450 million in fiscal 2015.

Reddy says one of Cyient’s biggest achievements was convincing American aerospace firm Pratt & Whitney (P&W) to select it as a supplier of engineering services. “It was a daunting task, as we were a small company with limited skills in aerospace. However, our strong focus on systems and processes helped us not only to convince P&W, but also enabled us sustain the relationship, which is still growing strong.”

This is borne out by the fact that Cyient is now part of the development of the next-generation aero engine programme for P&W, and has entered into several co-patents with the US firm. “The new gear turbo-fanned engine, that we helped engineer, does three things: it reduces noise of an aircraft engine, improves fuel efficiency and reduces carbon footprint,” says Reddy, who is now the Executive Chairman of Cyient, pointing out that Time magazine called it the innovation of the decade in 2010.

The engine is expected to halve engine emissions and noise by 2020 and at the same time double fuel efficiency. It will be offered on Airbus' A320neo narrow body plane, and could also be part of the Bombardier C Series, Embraer E-Jet E2 family, Mitsubishi Regional Jet, and the Sukhoi Superjet, among others. “P&W has acknowledged that we have contributed to 27 per cent of the design effort, and that 22 per cent of innovative ideas belong to us,” says Reddy.

Besides P&W, Cyient’s customers include Boeing, Airbus, Bombardier, Philips, Siemens and Westinghouse. And with experts agreeing that the future trend in aviation is leaning towards outsourcing—like Boeing did for its Dreamliner aircraft, where 30 per cent of its components came from outside the US—the prospects look bright for Cyient.

Noting that aerospace companies throughout the world tend to rely on collaborative partners to provide innovative technology solutions, Reddy says 98 per cent of Cyient's business comes from outside India and existing customers. “We have marquee names in the global manufacturing industry, but within the overall engineering sector, our strongest vertical is aerospace. Almost one-third of our business comes from aerospace. About $150-160 million came from aerospace last year," says Reddy.

Analysts at HDFC Securities point out that the aerospace vertical is likely to be a $3 billion opportunity for Indian players by 2020. According to the American Aerospace Industries Association, several US aerospace contractors are looking towards India. Apart from global requirements, US firms are keen to tap domestic Indian demand.

Cyient’s rivals in pure play engineering services include TCS, Infosys, Wipro, HCL, Tech Mahindra, and QuEST. “In EMS (electronics manufacturing services), we compete with SFO, Avlon, Eoline, JEBIL, among others, and in the complete product-life-cycle support, we compete with companies like Flextronics, Esterline, etc,” says Reddy.

Reddy says the company has identified several opportunities such as the Prime Minister Narendra Modi’s ‘Make in India’ push, the Defence Procurement Policy, Digital India and the Smart Cities project. “‘Make in India’ focuses on product realisation in India. With Cyient’s global customer base, and in-house engineering and manufacturing capability, we are ready to realise products in the Indian context,” he adds.

Cyient's recent acquisition of Rangsons Electronics (74 per cent stake), in the electronics system design and manufacturing space for an estimated Rs 360 crore has helped the firm establish in-house capability to provide turnkey solutions. “Our engineers have co-created over 40 patentable design solutions, and have been able to improve engineering productivity by 3-5 percent annually,” says Reddy, adding that the company works in the US through a joint venture. Cyient has a development centre in Puerto Rico, US, to provide engineering design services. “We have 800 engineers in that location and employ US citizens,” explains Reddy.

But he is already looking ahead. Cyient has its own R&D laboratory, an IOT (Internet of Things) lab, a 3D printing lab, and an automation laboratory. “How else can I be ahead of the customer,” he asks. For the past 18 months, Cyient has been actively pushing IOT. Reddy says the company has an aircraft engine health monitoring system, which is an IOT application. “At 30,000-40,000 feet in the sky, the application monitors the performance of various sub-systems on the aircraft engine. It creates about 18 gigabits of data every second. The company should now have the ability to do the analytics thereafter, and understand the data,” says Reddy.

The increasingly global nature of business in the engineering sector is resulting in competition, market expansion, and a shorter technology adoption cycle. This trend is forcing original equipment manufacturers to capitalise on opportunities.

Reddy insists that most companies are going through a major transition. These days, he says, engineering suppliers are expected to innovate and develop intellectual property, adapt new methods using existing tools, and improve speed and productivity.

“Earlier, the customer would tell you what they wanted, and you could then execute it. Now, the expectation is far different. You have to find out what the customer pain points are, and find a solution,” he says. “Till now, there was no risk. Now, they want us to innovate and handle the risk too.”