Larsen & Toubro’s Chief Executive Officer SN Subrahmanyan walks across to a “control room” in his Mumbai office to get real-time data from 400 sites that the company is operating miles away, down to how much particular fuel machinery is guzzling or what weight is being lifted by a crane at a construction site.
The company has built an in-house digital platform that seamlessly connects its diverse operations, helping it improve efficiency and reduce the time it takes to make decisions.
L&T is taking this initiative to the next level with its new strategic initiative, ‘L&T-Nxt’. This initiative will use new technologies, digitization, and analytics to commercially provide industrial solutions by tapping on opportunities as companies move towards ‘Industry 4.0’.
“We are committing significant investments and talent into this strategic effort and are confident that this will be an enabler for business,” SN Subrahmanyan, CEO and managing director, said.
‘L&T-Nxt’ will focus on artificial intelligence (AI), the Internet of Things (IoT), virtual reality, augmented reality, geospatial solutions, and cyber security to offer automation solutions to industrial clients by leveraging its diverse customer base and domain knowledge expertise.
“It is a multi-billion opportunity. It is early to talk about revenues because our in-house model needs market validation, but we expect to capture a significant market share. The aspirations of our younger leadership will drive this business,” JD Patil, senior executive vice president (defense business) and board member, told ET. He is heading the company, which has been incubated within L&T as a start-up.
The initiative already has a team of 150 people and aims to expand to 2,000 in five years.
“The boundaries between business, engineering, and technology are being dismantled. There is an awesome opportunity for organizations, and if you are not doing it, then there is a risk you will get left behind. That is why we are seeing some of these companies getting into these areas, creating ecosystems through partnerships and alliances, and incubating companies,” said DD Mishra, senior director at technology research firm Gartner.
L&T would be taking on IT global majors and other diversified conglomerates aggressively expanding their business in this space. A growing number of industrial and engineering companies are exploring the creation of new business lines using technologies such as the Internet of Things.
General Electric is separating its IoT platform business into a separate company with $1.2 billion in annual software revenues. It tied up with Mukesh Ambani-led Reliance Industries when the latter decided to diversify into this business. Wipro has Wipro Infrastructure as a separate company. MNCs like German engineering major Siemens are betting high on their digital offerings, with India at its core.
Pareekh Jain, the founder of Pareekh Consulting, said that this market is not entirely globalized and has local players with multi-billion opportunities. “For this infrastructure initiative, you need domain knowledge and hardware knowledge. And L&T has been doing that internally. L&T could make an end-to-end offering with infrastructure and hardware, and they could use L&T Infotech and L&T Technology Services for the services layer,” he said.
L&T has two listed IT companies, L&T Infotech and L&T Technology Services, and is acquiring a third, Mindtree. ‘L&T-Nxt’ will tap into domain expertise across IT and traditional businesses. This new business also aligns with the 80-year-old company’s strategy to give its services business a fillip, as they have a better profit margin than its traditional brick-and-mortar businesses.
“Internal selling is as difficult since we have fierce independence in each business, so we already have a team looking at it and will be expanding it,” Patil said.
The company will use its internal resources to market these offerings and build its team. L&T is now scouting for a CEO and COO for ‘L&T-Nxt’ and is open to filling these positions internally or externally.
“We have been building plants of every kind, which will give us an edge to be a super integrated company. Even companies that are not looking at new Investments can make the small incremental investment to get dramatic better efficiency out of their existing asset; that’s a big opportunity for us,” Patil said.
“They may have automation systems in place, but if you want to take it to the next efficiency level, you need clear measurement and data. We will measure, record, and analyze their data and work on the process. With algorithm and logic, we can build systems for customers once they can keep using them independently,” he said.
By putting sensors onto industrial machinery and factories, companies receive a steady stream of performance data and, with analytics, could predict breakdowns and try to prevent them. Industrial companies are tying these sensors into products to sell additional services, creating new revenue streams.
“Industry 4.0, with its automation and data exchange paradigms, represents a big opportunity for large diversified conglomerates. As they implement emerging technologies, these conglomerates learn how automation use cases work and which can impact business. They can also train their machine learning models on proprietary datasets, and from there, they could potentially abstract this learning into services to offer to customers,” said Mahesh Makhija, Partner and Leader of Digital and Emerging Tech, EY.
