Engineering services: Big outsourcing opportunity

India, already playing a leading force in the IT outsourcing market, is now in a position to expand services in engineering sectors. For India, there is a great opportunity in the global market for offshored engineering services. It is not only a significant revenue generator, but will also place India on the global innovation map. Attaining, training and retaining talent will be a critical next step for India to maintain its current advantage, industry experts say. Globally, the highest portion of work in engineering industry comes from the countries like US, Germany, and Japan.
“Companies in India have developed capabilities and skill sets, and have invested in technology platforms to leverage this opportunity,” Nasscom President Kiran Karnik said at a press conference in New Delhi.
Global spending for engineering services is currently estimated at $750 billion per year, an amount nearly equal to India’s entire gross domestic product By 2020, the worldwide spend on engineering services is expected to increase to more than $1 trillion. Of the $750 billion spent today, only $10-15 billion is currently being offshored—a tiny fraction of the total. India’s current share of the offshore engineering services market is about 12 percent. The total global offshore engineering spend will grow to $150 billion to $225 billion by the year 2020, India has the potential to control 20 to 25 percent of the global market for offshored engineering services by 2010. By 2020, that number could be 25 to 30 percent, or $50 billion of the expected $150 to $225 billion market.
Engineering services offshoring could facilitate creating 150,000 to 200,000 additional jobs, up to 1,000,000 with multiplier effect. India needs to invest now to yield the required number of engineers by 2020, the report said.
Of India’s total market share in offshored engineering services, High-Tech/Telecom will likely represent the largest segment, capitalizing on India’s existing relationships and expertise. Automotive will most likely be the second-largest sector. The engineering market is a fragmented one with high-tech/telecom occupying 30% of this space, followed by automotive (19%), aerospace (8%) and utilities (3%). India is targeting the high-tech/telecom and automotive sectors, where outsource vendors find themselves on a strong footing in terms of both infrastructure and expertise.
Indeed, a number of giant automotive and aerospace companies have some of their engineering services done by Indian technology companies. Ford Motor Company, General Motors, Boeing, Airbus, and virtually every semiconductor manufacturing company, electronic goods maker, mobile handset vendor, and more have some work outsourced to India.
Engineering services (ES) outsourcing will create $40 billion opportunity for the Indian IT industry by 2020, a Nasscom report said. Nasscom and management consulting firm Booz Allen Hamilton on Thursday released the key findings of a study “Globalisation of engineering services-the next frontier for India.”
Infosys recently decided to hire 100 U.S. graduates to encourage better mutual understanding of one another’s markets. While no other Indian company has hired this many foreigners at one time, others are employing interns from other countries who sometimes stay on longer.

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