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 gives seamless connectivity to its diverse operations and helps it improve efficiency and reduce the time taken for decisions.
L&T is taking this initiative to the next level with its new strategic initiative, appropriately called ‘L&T-Nxt’, which 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 the areas of artificial intelligence (AI), 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 share of the market. The aspirations of our younger leadership will drive this business,” JD Patil, senior executive vice president (defense business) and member of the board, 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 scale it up 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 and creating ecosystems through partnerships and alliances and incubating companies,” said DD Mishra, senior director at technology research firm Gartner.
L&T would be taking head-on IT global majors and other diversified conglomerates who are aggressively expanding their business in this space. A growing number of industrial and engineering companies are looking at creating new business lines by 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 as 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 its 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 in the process of acquiring a third, Mindtree. ‘L&T-Nxt’ will tap on domain expertise across its IT as well as traditional businesses. This new business is also in line 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 tap on its internal resources for marketing 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, and that will give us an edge to be a super integrated company. Even companies which 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 level of efficiency, then 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 on their own,” he said.
By putting sensors onto industrial machinery and in factories, companies receive a steady stream of data on performance 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 paradigms of automation and data exchange represents a big opportunity for large diversified conglomerates. As they implement emerging technologies, these conglomerates learn how automation use cases work and which ones can impact business. They are also able to 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, Digital and Emerging Tech, EY.