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Sep 13, 2007

Potential in Engineering Outsourcing Services

Engineering Outsourcing services are new discussions points among the outsourcing experts. This article is the response to question asked in I had given some pointers on ESO markets and opportunity for Indian companies in this market. There was earlier some articles on the subject by PTI. You can read it in the following link Engineering services: Big outsourcing opportunity. Please do click below to read more.

“As per latest report by Nasscom and Booz- Hamilton the Outsourced engineering services have potential to grow to 40 Billion USD by 2020 for India alone. As per IDC report worldwide market for outsourced engineering was worth $69.8 billion in 2001, with a forecast to grow at a five-year compounded annual growth rate (CAGR) of 12.2 per cent, to $123.9 billion in 2006. According to another report, the total engineering services market was worth $746 billion in 2004 and will touch $1,100 billion by 2020. Of this the outsourced component could be worth around $200 billion. Currently, the ESO market is worth around $15 billion with India garnering a healthy 12 per cent share.

The Hitech and Automotive markets are where most of Indian IT companies are present on date. However, Civil engineering outsourcing services market is picking up really fast. The key sectors are telecom, semiconductors, consumer electronics, computing systems, industrial automation, and medical devices; automotive; aerospace; construction and industrial machinery; and, utilities 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. According to an online survey of American Automotive Executives conducted by AT Kearney, India leads the outsourcing market when it comes to auto-outsourcing with 24 per cent of auto manufacturers giving it the thumbs-up for outsourcing. Bigger automotive markets such as China and Mexico lag behind at 15 per cent and 13 per cent, respectively, while other locations such as Brazil, Thailand and the Philippines corner less than 10 per cent of the actual outsourcing markets.
However, Engineering services is not just design. Examples of processes that are easily outsourced and which see value addition from an offshore vendor include, among others, validation, simulation, pre-production work and product life-cycle management.”