In this interview Jigar Mehta, Managing Director, Onward Tech in conversation with Minu Sirsalewala, Executive Editor, Dataquest, elucidates why Onward Technologies has placed its bets on a pure-export business strategy, the no-IP stance and on that big chunk of huge R&D contracts of global companies that are waiting to be tapped. And how being a young company is helping with advantages and challenges unique to that stage. Global Vision, Local Talent: Onward Technologies' Strategic Pivot to International Markets"

Onward Technologies has undergone a significant shift since 2016, focusing on 3 core verticals. What prompted this strategic decision?

The strategic decision to focus on 3 core verticals and pursue an international market was driven by a confluence of factors. Upon assuming leadership, we prioritized the transformation from a family-run business to a professionally managed organization.

A strategic review identified a high-growth market with substantial outsourcing budgets and significant room for expansion. While our existing mechanical engineering business in Pune served a valuable purpose, we agreed to pursue a more ambitious strategy. This involved pivoting entirely towards the USA and European markets. In 2016, industry analyst Zinnov had projected the global addressable R&D services market to reach USD 289 Bn by 2020—USA & EU-based companies being the largest spenders. Our pivot to those markets offered compelling growth drivers and has been instrumental in propelling Onward Tech onto a new trajectory, positioning it for sustained growth in the global marketplace.

What happened next?

Our execution strategy was multifaceted. We prioritized building a robust export business, with the planned phase-out of domestic operations following a predetermined growth trajectory. This process was instrumental in uncovering exceptional talent within the organization. These individuals, now holding key leadership positions in the USA and Europe, continue to be the cornerstones of our success.

The strategic shift has yielded significant financial rewards. We have achieved a strong and consistent revenue stream, crossing INR 470 Crore in FY 2024 with double digit EBITDA margin, while reaching a market capitalization of INR 1000 Crore+ for the first time.

Building on this momentum, we've identified strategic investment areas in cutting-edge technologies like embedded systems and digital services. Furthermore, leveraging our experience, we've chosen to specialize in the high-growth verticals of industrial equipment, heavy machinery,  transportation, mobility, and healthcare. By collaborating with marquee original equipment manufacturers (OEMs) in these sectors, we are solidifying our reputation and building strong credentials. Today, Onward Tech works with 8 of the global top-10 automotive companies and 5 of the global top-10 industrial equipment companies. Our rail transportation and newly created healthcare verticals also continue to make great progress in North America. Our global footprint has expanded considerably, encompassing 13 offices strategically located across key regions in the US and Europe, with offshore delivery centers across 5 locations in India.

What’s the future looking like?

To further solidify our position as a global delivery hub, we are actively strengthening our teams, particularly in Pune and Chennai, where we have a highly specialized ER&D delivery team of more than 1000 engineers each. We envision Bangalore and Hyderabad as the next key growth centers, strategically positioned to cater to a wider range of international clients.

What’s the niche in terms of competition?

Our competitive advantage lies in a compelling combination of cost efficiency and a robust global delivery model. This enables us to deliver technically proficient solutions, significantly reducing client rejection rates. Our value proposition hinges on a trifecta of cost competitiveness, a reliable supply base, and demonstrable technical expertise. Today, clients trust our speed, efficiency, and agility to rapidly ramp up their engineering teams on complex projects delivered out of USA, Canada, the UK, and Germany. This targeted approach has been instrumental in our successful scaling globally, where we have now crossed 150 full-time employees outside India.  Furthermore, we possess a best-in-class ecosystem and infrastructure, further solidifying our position as a preferred partner.

Are you looking at taking your IP out to the market?

While we accelerate innovation for large global OEMs, early in our strategic development, we made a deliberate decision to have all client intellectual property (IP) reside with them. This fosters a strong foundation of trust, as we have no intention of encroaching on their core business operations. This unique value proposition has been a marker of our success.  Furthermore, to ensure complete transparency and client confidence, we operate with a direct business model supported by a robust professional service automation (PSA) software for real-time, online project management. Our rigorous client onboarding process incorporates pilots, reference checks, thorough financial assessments, and comprehensive site visits. Having established this solid foundation, our primary focus for the next three to five years will be on driving digital and ER&D innovation with flawless execution for North American and European companies in our focused industry verticals.

How do you envision scaling the company further, considering the challenges of talent pool scarcity and your focus on high-profile clients?

Our growth strategy leverages the immense potential within our existing client base.  These clients typically allocate multi-billion-dollar budgets for R&D, and we currently capture less than 0.1% of their outsourced projects. This represents a vast untapped market brimming with opportunity.  Our established reputation, positive word-of-mouth, and demonstrable expertise position us for continued success.

On the talent front, we possess a strong foundation with over 2,450 engineers. Our strategic vision involves investing and growing our international presence to 300+ employees collaborating with offshore development centers (ODCs) driving delivery excellence.  

“We need to get where our customers are.”

This also provides the clients with a highly competitive blended rate-card. Furthermore, we are committed to international transfers and continuous development of our key personnel, ensuring they possess the expertise to excel in this evolving market.

Going by the recent client wins, opportunities to work with the biggest brands in our focused verticals and industry accolades—the past three years have undeniably been the most exciting in our company's history.

While cost remains a factor for some clients, is it still your primary target market?  Are you pursuing multi-million-dollar contracts?

Our target market extends beyond companies solely focused on cost reduction. We understand that we are a relatively young company, and our strategy is designed for sustainable, long-term growth. We are actively attracting large companies as clients and bidding for multi-million-dollar contracts.

Are there any plans to diversify into additional industry verticals soon?

For the next three years, we are laser-focused on maximizing our potential within our existing verticals. These include transportation and mobility, comprising automotive and rail. Industrial products and heavy machinery, including off-highway, construction, mining, agricultural equipment. And healthcare, comprising medical devices and technologies, and life sciences. Client demand for solutions that encompass all three areas is rising steadily. To address this, we've strategically invested in hiring specialists and subject matter experts (SME) from each of these industry verticals.

Can you elaborate on your current key areas of focus?

Our primary focus revolves around flawlessly executing our export-driven strategy. This goes beyond just operational excellence.  We are actively cultivating a culture that prioritizes attracting and retaining exceptional talent. Recognizing the importance of proximity to our clients, we are establishing a presence in key locations. This not only fosters stronger client relationships but also allows us to deliver impactful solutions that resonate with their specific needs.

Minu Sirsalewala & Pratima H