Engineering Outsourcing - The Next Growth Frontier

ESO. "Engineering services Outsourcing". Everyone would do well to remember the term. AfterIT services, IT enabled services, and new thing IT infrastructure management (fine, remote IT infrastructure management), this, ESO, is the new, new new thing. So says a report that has been put out by NASSCOM in association with consulting firm Booz Allen Hamilton. How attractive is the opportunity? $40 billion by 2020.

After IT and ITES making an impact in the outsourcing market, engineering services is following steps at a fast pace catering to

• Engineering outsourcing
• Aerospace design
• Construction
• Pharmaceuticals
• Automotive design
• Industrial machinery products

Engineering outsourcing is becoming a necessity as customers get more demanding, competition gets more intense and product life-cycles shrink creating pressure on operating margins.

In india we have a large pool of engineeres who are technologicaly more competent and having exposure in various fields...According to the Nasscom report, the total offshore engineering spend is expected to grow to $150-$225 billion by 2020, and India, with its talent pool and existing experience in engineering services, is well-suited to realize 25 per cent of the opportunity.

India with its advantages of highly qualified professionals can provide high-quality engineering services in the fields of Structural, Mechanical & Electronic Engineering - analysis and design, embedded software, Plant Design, Process Engineering, Plant Automation Services and Enterprise Asset Management and OEM solutions.

Engineering outsourcing is gaining momentum as it involves labor-intensive engineering processes (structural drafting and detailing, conversion services, cost estimations and a lot more) that can be outsourced. It ensures quick turnaround time, competitive pricing, capabilities to develop customized software to the engineering project management needs and provides certified engineers proficient in state-of-the-art engineering tools and technologies for enhanced productivity at low cost.

There will be one very important difference. In the IT and it enabled services space, although there is enough research to show there is no correlation and people have gone back and forth, there is some amount of perception that moving work equals moving jobs. In this area it is vastly different. You are very often doing things which are not being done or cannot be done. You are not moving existing work.

In the short term, the incentive for doing this is the economic benefit. But growing global capabilities is the real opportunity. This is not about substitution (moving work from one location to another). There are really two costs in outsourcing. One is transition cost, and the other is operating cost. In setting a captive you minimise your transition cost, particularly when there isn't a strong vendor community. Over time, the value is in talent and the vendor community should win because it is going to be more innovative and capable; you have to remember how hard it is to maintain the competitiveness of a captive when you are not based in that country. But they are all going to survive.

Technological power will shift from the West to the East as India and China emerge as big players in the global outsourcing market. The two countries have the size and weight to transform the 21st global economy.Engineering services will give India the edge as it aggressively gains momentum in the manufacturing space.

The key thing is the o part of the ESO and India is the only country in the world to have perfected offshoring. What can prevent India? India can prevent India and it has shown itself capable of doing so in the past. The thing going for us is the technological foundation that has been put down in India starting the 1950s. The concern I have is the desperate need for radical education reform that encompasses issues related to quality and quantity. I don't see that happening in a business-as-usual model.