KEY
FINDINGS OF THE STUDY
1. Engineering services is a growth market: Current spending
on engineering services ($750 billion in 2004) is projected
to increase to $1.1 trillion by 2020. The market is highly
fragmented by industry, with Automotive at 19%, Aerospace
at 8% and Utilities at 3% in 2004. High-Tech/ Telecom
is the dominant and fastest growing sector, with 30% of
the market
2. CEOs are increasingly viewing offshoring as a way to
counter market forces that are exerting pressure on engineering
services: While cost control remains a concern, companies
are also seeking access to a high quality talent pool
that can grow engineering capacity and increase productivity.
Locating engineering services in emerging markets also
provides access to a growing market of customers, and
can decrease time to market. While in FY05, only $10-15
billion of engineering services was offshored, the market
is expected to grow to $150 -225 billion by 2020.
3. India’s current share of the offshored engineering
services market is about 12% – relatively small as
compared to its information technology and business process
outsourcing sectors: The study also found that India is
well-positioned to increase its market share of engineering
offshoring from 12% to 30% by 2020. The potential engineering
market in India could exceed $40 billion by 2020.
4. India offers a unique set of attributes that will translate
into a sustainable position as an offs-shoring destination
5. The impact of the engineering services opportunity
for India could be widespread, if the right actions are
taken
• ES offshoring could help create 150,000-200,000
additional jobs – up to 1,000,000 with multiplier
effect. India needs to invest now to yield the required
number of engineers by 2020.
• ES offshoring will have a more direct impact on
improving India’s global competitiveness in the industrial
sector than BPO and ITO
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• Capabilities
built through ES offshoring will enhance India’s
strategic position, benefiting key sectors such a defense
and aerospace
• ES offshoring will not only create opportunities
for workers in major metro areas, but also for those in
more rural areas
Discussing the report, Mr. Kiran Karnik, President NASSCOM
said, “The Indian IT and software industry is continuously
renewing itself and seeking to grow by addressing newer
service lines; the latest one being engineering services.
Companies in India have developed capabilities and skill
sets, and invested in technology platforms to leverage
this opportunity. The growth in engineering services signifies
the need for global corporations to expand their R&D
pool beyond their home countries”.
“The total offshore engineering spend is expected
to grow to US$150 – US$225 billion by the year 2020,
and India with its talent pool# and existing experience
in engineering services, is well suited to realize 25%
of this opportunity. However, we must ensure that required
steps are taken by stakeholders to address possible roadblocks
- especially those concerning workforce”, he added.
“The demand for engineering talent is growing, and
emerging market countries such as India will play a vital
role in expanding capacity,” said Kevin Dehoff, Vice
President at Booz Allen. “Companies will increasingly
create competitive advantage by accessing and building
core innovation capabilities in a world-class global network.”
Vikas Sehgal, Executive Director, Booz Allen Hamilton
said “For India, Engineering Services Offshoring
presents a tremendous opportunity – 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.”
Commenting on the findings of the report, Mr. BVR Mohan
Reddy, Founder, Chairman & Managing Director, Infotech
Enterprises and Chair, NASSCOM Engineering |
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Services
Forum said “Spending on engineering services was US$750
billion in 2004 and is projected to increase to US$1.1 trillion
by 2020.
The report also indicates that the market is highly fragmented
by industry with Automotive at 19%, Aerospace at 8% and Utilities
at 3% in 2004. High-Tech / Telecom is the dominant and fastest
growing sector, with 30% of the market, and the traditional
engineering powerhouses – USA, Germany and Japan have a
lead in engineering spend.”
As per the report, India enjoys a relatively strong position
in the automotive and high-tech / telecom engineering services
market with a US$25 billion opportunity by 2020. Aerospace offers
the greatest potential for expansion – though it is also
one of the toughest opportunities to tap because of its close
association with the defense sector. The report calls for greater
support from the government to realize this opportunity.
If addressed appropriately, engineering services offshoring
(ESO) can help the Indian offshore services industry further
consolidate its leadership position and build a significant
skill-value advantage over the competition.
Mr. B Ramalinga Raju, Founder and Chairman of Satyam Computer
Services & Chairman NASSCOM said, “Today, globalisation
of innovation is being spearheaded by the largest spenders on
innovation, in terms of both regions and sectors. Engineering
Services offshoring is being used to expand global innovation
capacity. To target the maximum potential revenue of $40 billion
by 2020 – all important stakeholders including the government
of India, academic institutions, service providers and trade
bodies such as NASSCOM will need to undertake a series of important
measures. A carefully thought out strategy that combines strong
marketing efforts – such as the development of an ‘Engineered
in India” brand, with investments in infrastructure, workforce
and expertise and the very least is required. In addition, it’s
important for all stakeholders us to get together and think
about how India’s domestic growth can become a strategic
advantage in the long term.” |
