We are looking
Associates in US, Europe
KPO Experts India
Knowledge Process Outsourcing (KPO) Services
Outsourcing: Engineering Services, Engineering KPO
A joint study for the potential of outsourcing engineering services to India was conducted by NASSCOM and Booz Allen Hamilton.The report is focused on ‘core’ engineering service outside software engineering, PLM and other IT enabled services. The framework used examined demand-side, supply-side and competitive dynamics.The core engg. services included are:
1. Aerospace, Automotive, Construction & Industrial machinery, Telecom and Utilities
2. Product and component design, Plant design, Process engineering and Plant maintenance & operations
The study has found that India comprises 28% of the suitable global talent pool for offshoring services; 12% of the total engineering workforce is currently in India.
The brief important findings of the report are as under:
1. The Report estimates USD $40 billion opportunity for India by 2020
2. To create 250,000 jobs for Indian engineers
3. Defines the roadmap for stakeholders to achieve this potential by charting next steps for stakeholders
The detailed 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
* 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
STRATEGIES FOR SUCCESS
To realize this opportunity, India needs to develop a multi-pronged strategy for success. Some of the recommended actions are broader in scope, related to those required to sustain our lead in IT-BPO exports – and are already at various stages of planning and execution. Others are more specific, targeted at addressing the engineering services market.
i. Build the “Engineered in India” brand
ii. Build domain expertise through symbiotic relationships with experts
iii. Focus on infrastructure creation
iv. Undertake initiatives to improve workforce
v. Leverage local industry ‘offsets’
vi. Align government policy and incentives
Build the “Engineered in India” brand
1. Marketing India as a destination of choice by creating a division
which specifically addresses this segment
* Establishing industry specific international trade bodies, conducting regular trade shows and leveraging Indian consulates for educating local and international governments on benefits of offshoring
Build domain expertise through symbiotic relationships with experts
* In public sector entities within India
* Acquiring design houses in the US, Europe and Japan to gain requisite expertise and hiring experts from other countries
Focus on infrastructure creation
* With an islands of infrastructure approach for physical infrastructure and consortium based approach for engineering infrastructure
Undertake initiatives to improve workforce
* Address quantity issues with investment in academic institutions,
special national level technical diploma programs, allow for private
spend to increase quantity
* Address quality issues by standardizing curricula, training and certification programs, investment in long-term internships and solicit government help in retention
Leverage local industry ‘offsets’
* The government should take a structured approach to leveraging industry – for e.g. large imports in Aerospace, Defense, and Utilities should be leveraged through offset programs
Align government policy and incentives
* Policy towards facilitation of adequate visas are available for
professional services, conducive bilateral relations, investment in
infrastructure and strengthen law to enhance IP protection
* Incentives for investing in R&D and innovation
Comments of the leaders of the industry on the above report:
NASSCOM the premier trade body and the “voice” of the Indian IT industry, and management consulting firm Booz Allen Hamilton, released the key findings of a study “Globalisation of Engineering Services – the Next Frontier for India”. This is the first study to take a systematic and comprehensive view of the role of emerging markets in engineering services and assess the evolution of the engineering market between 2005 and 2020.
This findings estimate an additional US$ 40 billion opportunity for the Indian IT industry by 2020, from offshoring of engineering services alone. 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 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.”
KPO on the Web
Scope & Future of KPO
: Enhanced version of BPO
KPO has enhanced requirements than BPO. What has enhanced? Find out.
Learn more about five most likely outsourcing trends in KPO.
jobs : Scope & Future
Learn more about five most likely outsourcing trends in KPO.
Trend : Engineering KPO
There is huge potential of outsourcing of engineering services to India.
& Future of KPO
Reports by NASSCOM, Evalueserve & Outsource2India.com
More about KPO
Should you outsource or not? Find the the top reasons to outsource...
India had become a preferred KPO destination? Find out why it is so...
KPO is the latest buzzwords. What exactly it is? and how can you benefit?
Why should you consider KPO? and what can KPO deliver to you?
& Future of KPO
See the reports of NASSCOM, Evalueserve and Outsource2India.com
KPO : Precautions & Threats
Many KPO deals bust at the start. Take these precautions to ensure success.