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Engineering services: Big outsourcing opportunity
October 16, 2006 13:21 IST
India enjoys a relatively strong position in the automotive and high-tech telecom engineering services market with a $25 billion opportunity by 2020, according to a latest industry report. 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 defence sector.
"The total offshore engineering spend is expected to grow to $150-$225 billion by the year 2020, and India with its talent pool and existing experience in engineering services, is well suited to realise 25 per cent of this opportunity," Kiran Karnik, president, Nasscom.
"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," said Karnik in the report.
Engineering services are a $40 billion opportunity for India by 2020, but to achieve that there is need to create 250,000 jobs for Indian engineers and also chalk out a roadmap for stakeholders to achieve this, said Dr Harsh Gupta, director, Centre for Design and Research, Pentair.
Also, to capture the market, what is needed is a brand name for Indian services, same on the lines of software, Dr Gupta said. Agreeing, B Ramalinga Raju of Satyam Computer Services said, "... 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 a '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 to get together and think about how India's domestic growth can become a strategic advantage in the long-term, he said.
"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, of Booz Allen, which along with Nasscom conducted the study.
"Companies will increasingly create competitive advantage by accessing and building core innovation capabilities in a world-class global network," he said in the report.
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, industry experts say.
SS However, BVR Mohan Reddy of Infotech Enterprises said the report also indicates that the market is highly fragmented by industry with Automotive at 19 per cent, Aerospace at 8 per cent and Utilities at 3 per cent in 2004. High-Tech and Telecom is the dominant and fastest growing sector, with 30 per cent of the market, and the traditional engineering powerhouses - USA, Germany and Japan have a lead in engineering spend.
The report calls for greater support from the government to realise 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, he said.