India, a key player in engineering services mkt

MUMBAI, INDIA: It's nearly around two decades, since India entered the outsourcing market. With proven track records attributed with quality services at affordable costs in the IT field, the word 'outsourcing' has almost become a synonym for India.

During these past decades, India has expanded its outsourcing services portfolio beyond the IT field. In fact, the country has been offering engineering services including hi-tech designs, product research and development (R&D) globally.

According to Vikas Sehgal, Booz & Company's vice president and director - India business, the engineering services industry is worth around US$ 40 billion and has the potential to increase India's output by US$ 1 trillion. “The engineering services can add up to 2 per cent growth to India's GDP.”

Indian engineering services firms are largely catering to global enterprises in telecom, automotive, consumer electronics, aerospace and other verticals. “Indian vendors are executing cutting-edge projects for global majors ranging from Boeing to Pratt & Whitney to Ford and JCI. India's R&D offshoring engineering services market is worth around USD 9-14 billion and the total market is about USD 35 billion,” Sehgal says.

A study jointly undertaken by NASSCOM and Booz & Company states that the global sourcing market for engineering design and product R&D is likely to increase around USD 150 billion in 2008 to USD 200-220 billion by 2020. Presently, India has a dominant market share of 20-25 per cent of the global engineering services market, followed by China with 15-20 per cent market share.

Sehgal points out that in comparison with China, India is a value game, not volume. And the value proposition is beyond the cost. “However, Indian services firms have challenges ahead such as need of business models to resonate with value proposition, the market and drivers of offshoring engineering services are evolving but it's no more an arbitrage game.”

“Outsourcing of engineering services as well as captives for global companies will exist here as the drivers of growth are access to emerging markets and values in services,” he observes.

Further the study says that automotive, telecom and consumer electronics will continue to be the dominating verticals in 2020. With worldwide acceptance in global engineering market place, the brand is swifting from “Engineered by Indian” to “Engineered in India.”

In comparison with offshoring of IT services, the potential and scope of engineering services is huge and attractive. According to Sehgal, globally the engineering or hi-tech companies spend around US$ 150-200 millions on R&D, which is more than their IT spend.

“India's engineering supply base is gaining scale and scope; and services vendors need to focus more on verticals or sub-verticals and will have to provide value in services,” Sehgal concludes.