'Engineering services, the next growth frontier'

Bangalore, Aug 3: Offshoring of engineering services will chip in an additional opportunity of US Dollars 40 Billion for India by 2020, according to a joint report by NASSCOM and Booz Allen Hamilton, a management consulting firm.

The study ''Globalisation of Engineering Services-the Next Frontier for India'' was the first one 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.

It outlined the existing and potential opportunities along five verticals and four service lines.

NASSCOM President Kiran Karnik said the Indian IT and software industry was continously renewing and seeking to grow by addressing new service lines. The latest one was engineering services.

''Companies in India have developed capabilities and skill sets, and invested in technology platforms to leverage this opportunity,'' he said, adding that the growth in engineering services signified 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 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. However, we must ensure that required steps are taken by stakeholders to address possible roadblocks-especially those concerning workforce'', he added.

NASSCOM Engineering Services Forum Chair and Founder, Chairman and Managing Director, Infotech Enterprises BVR Mohan Reddy said the spending on engineering services was projected to go up to US Dollars 1.1 trillion from US Dollars 750 billion in 2004. The report indicated that the market was highly fragmented by industry with Automotive at 19 per cent, Aerospace at eight per cent and Utilities at three per cent in 2004. High-Tech/Telecom was the dominant and fastest growing sector, with 30 per cent of the market, while the traditional engineering powerhouses--USA, Germany and Japan had a lead in engineering spend.

It said India enjoyed a relatively strong position in the automotive and high-tech/telecom engineering services market with a US Dollar 25 billion opportunity by 2020. Aerospace offered the greatest potential for expansion, though was also one of the toughest opportunities to tap because of its close association with the defence sector. The report called for greater support from the government to realise this opportunity.

The report said 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.

NASSCOM Chairman B Ramalinga Raju, in his comments, said to target the maximum potential revenue of 40 billion Dollars by 2020 all important stakeholders, including the Union Government, academic institutions, service providers and trade bodies such as NASSCOM, would need to undertake a series of important measures. He said a carefully thought out strategy that combined strong marketing efforts such as the development of an 'Engineered in India' brand, with investments in infrastructure, workforce and expertise and the very least was required.

The study said India's current share of the offshored engineering services market was about 12 per cent--relatively small as compared to its information technology and business process outsourcing sectors. The study also found that India was well-positioned to increase its market share of engineering offshoring to 30 per cent by 2020.

Engineering services offshoring could help create 150,000-200,000 additional jobs up and the country need to invest now to yield the required number of engineers by 2020.

It said capabilities built through Engineering services off-shoring would enhance India's strategic position, benefiting key sectors such a defence and aerospace.

UNI