From outsourcing to engineering services

Engineering services are the next big thing for India and China, a new study by consultants Booz Allen Hamilton finds. Unlike for lower value business services, the competition for engineering services is likely to revolve around access to highly skilled workforce and strategic emerging markets, not simply cost-cutting.

by Booz Allen Hamilton; NASSCOM
Last Updated: 23 Jul 2013

The study was carried out in association with the National Association of Software and Service Companies (NASSCOM), the organisation promoting and regulating the IT sector in India.

Although the market for engineering services is highly fragmented by industry, with high tech and telecoms the dominant sector, it is projected to grow to $1.1 trillion by 2020, up from just $750 million in 2004.

India's revenues from this market is relatively small at the moment compared to the flourishing IT and business process outsourcing sectors. But the research expects India to increase its share of the engineering services market to 30% by 2020 (up from 12% currently), which could exceed $60 billion.

"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," says Kiran Karnik, president of NASSCOM.

But India is not alone. China, Latin America and Eastern Europe are all keen to get a share of the new lucrative pie, and many companies (46%) see China as one of the greatest prospects in this field.

"The offshoring of innovation poses unique challenges not found in IT or business process outsourcing," says Vikas Sehgal, principal at Booz Allen Hamilton. "The emerging markets that can meet the needs of global corporations for infrastructure, skilled labour and a positive business environment will capture the largest growth in market share."

Something which might be worth doing, since the value of offshored engineering services is expected to grow to $150-225 billion by 2020.

Source: Globalization of engineering services
NASSCOM / Booz Allen Hamilton

Review by Emilie Filou

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