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Why is BMW tying up with Tata Technologies for software R&D?

The two companies will establish a joint operation that will ultimately have over 1,000 software engineers

Screenshot 2024 04 03 084647In yet another example of a traditional manufacturing company tying up with an IT services firm for R&D and product development, global automotive leader BMW will create a software and IT development hub in India in association with Tata Technologies.

Traditional companies, particularly those in the manufacturing sector, often seek tie-ups with third-party services companies like Tata Technologies and Accenture for their R&D and design activities. These collaborations offer the companies two major advantages — the ability to quickly scale up and down their staffing requirements, and access to state-of-the-art tools, platforms and technologies to accelerate their development activities. Such tie-ups also help these companies tap lower-cost locations such as India without having to go through the process of establishing a new company in the country.

The new JV will develop automotive software, including software-defined vehicle (SDV) solutions for BMW Group’s premium vehicles and digital transformation solutions for its business IT. More and more, cars and other vehicles are relying on software solutions as a key differentiator.

The new operations will initially have 100 professionals from Tata Technologies, and will eventually grow to at least 1,000 software engineers eventually, the German company said.

The main development and operations activities will be established in Bengaluru and Pune, while Chennai will focus on business IT solutions.

Traditional companies, particularly those in the manufacturing sector, often seek tie-ups with third-party services companies like Tata Technologies and Accenture for their R&D and design activities. These collaborations are driven by several key factors that enable these companies to stay competitive in an increasingly technology-driven landscape.

Firstly, third-party services companies possess specialized expertise and knowledge in various domains, such as digital engineering, software development, and IT solutions. By partnering with these firms, traditional companies can access a wealth of talent and resources that may not be available in-house. This allows them to accelerate their R&D efforts and bring innovative products and solutions to market more quickly.

Secondly, collaborating with third-party services companies can be more cost-effective than building and maintaining an extensive in-house R&D team. These partnerships provide flexibility and scalability, allowing traditional companies to adjust their R&D investments based on their current needs and market demands. This is particularly beneficial for companies operating in dynamic and competitive industries where rapid adaptability is crucial.

Moreover, third-party services companies often have a global presence and can provide access to diverse talent pools and markets. This enables traditional companies to tap into a broader range of skills and perspectives, fostering innovation and helping them develop products and solutions that cater to a wider customer base.

Besides the tie-up between Tata Technologies and BMW Group, another instance is the partnership between Accenture and Faurecia, a leading automotive supplier, to develop and implement a digital manufacturing platform. This collaboration focuses on leveraging advanced technologies such as artificial intelligence, digital twins, and 5G to optimize Faurecia’s manufacturing operations and improve efficiency.

Against this, there are some companies that have handed over a large part or the whole of their R&D efforts to an external agency. However, this can lead to a loss of control over the direction and quality of the work, potentially resulting in misaligned objectives and outcomes that don’t fully meet the company’s needs.

Sometimes, companies also establish captive development centers in India. A captive development center is a wholly-owned subsidiary of a company that is set up in a different location, often in countries like India, to take advantage of the local talent pool, lower costs, and favorable business environment.

SAP, a leading enterprise software company, has a captive center in Bengaluru that focuses on product development, engineering, and research. Similarly, Bosch, a multinational engineering and technology company, has a captive center in Coimbatore that works on software development and IT solutions for the automotive industry.

However, the challenges in this case are that companies need to navigate cultural differences, manage remote teams effectively, and ensure that the work produced by the captive center integrates seamlessly with the parent organization’s processes and systems.

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