Indian engineering services set for boom era

Nasscom has released the key findings of a study "Globalisation of engineering services - the next frontier for India".

Nasscom the premier trade body and the "voice" of the Indian IT industry, and management consulting firm Booz Allen Hamilton, today 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.

The findings estimate an additional US $40 billion opportunity for the Indian IT industry by 2020, from offshoring of engineering services alone.

The report outlines the existing and potential opportunities along five verticals and four service lines.

Discussing the report, 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 and D pool beyond their home countries".

"The total offshore engineering spend is expected to grow to US $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% 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, BVR Mohan Reddy, Founder, Chairman and Managing Director, Infotech Enterprises and Chair of the 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/telecomms engineering services market with a US $25 billion opportunity by 2020.

Aerospace offers the greatest potential for expansion - although it is also one of the toughest opportunities to tap because of its close association with the defence sector.

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.

B Ramalinga Raju, Founder and Chairman of Satyam Computer Services and 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 off-shoring 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".

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