| Bill Gates once said Success is a lousy teacher. It | | | | To this effect, a road map at the industry level with a |
| seduces smart people into thinking they can't lose. | | | | policy framework keeping competition and our |
| Anything today in the name of outsourcing is catching | | | | strengths in consideration is necessary to gain |
| focus of attention. Needless to mention the word BPO | | | | momentum. |
| is signature of India’s success in the world of | | | | |
| global outsourcing. At the same time we need to be | | | | |
| wary of the competition that is growing around us. | | | | |
| v\:* {behavior:url(#default#VML);} o\:* | | | | Drivers: |
| {behavior:url(#default#VML);} w\:* | | | | |
| {behavior:url(#default#VML);} .shape | | | | 1. Better business metrics |
| {behavior:url(#default#VML);} Normal 0 false false false | | | | 2. Creating time and skill utility — by |
| EN-US X-NONE X-NONE /* Style Definitions */ | | | | embracing global servicing model |
| table.MsoNormalTable {mso-style-name:"Table Normal"; | | | | 3. Vertical engineering companies embracing |
| mso-tstyle-rowband-size:0; mso-tstyle-colband-size:0; | | | | global sourcing model for strategic purpose of cost |
| mso-style-noshow:yes; mso-style-priority:99; | | | | and efficiency management |
| mso-style-qformat:yes; mso-style-parent:""; | | | | 4. IT Services firms spot significant value |
| mso-padding-alt:0in 5.4pt 0in 5.4pt; mso-para-margin:0in; | | | | besides the existing operators |
| mso-para-margin-bottom:.0001pt; | | | | 5. Investment and allocation of funds with the |
| mso-pagination:widow-orphan; font-size:10.0pt; | | | | need to develop R&D and IT capabilities will also have |
| font-family:"Calibri","sans-serif";} | | | | a spin off impact |
| Engineering; Destiny India - ESO | | | | |
| | | | | Risks |
| Introduction | | | | |
| | | | | 1. Customer acquisition costs and retention is |
| | | | | high |
| Taking cue from what Gates quoted, it is critical to | | | | 2. Far greater risks in managing global teams |
| note that sustaining leadership position is about | | | | than in ITO or BPO outsourcing |
| constantly upgrading abilities to deliver smarter, faster | | | | 3. Strategic leadership time and effort is |
| and quicker. Equally important is scaling up the value | | | | pre-requisite for success of ESO |
| chain by enhancing the customer experience thru | | | | 4. Highly iterative standards and complexity of |
| innovation, process development and breath of service | | | | delivery |
| offering. | | | | 5. High level of domain knowledge leads to |
| | | | | complexity in hiring talent |
| The emergence of engineering service outsourcing | | | | 6. Retaining talent comes with super |
| (more than just an engineering BPO) is one such area | | | | specialized work reducing opportunities of re-skilling |
| after ITO, BPO, KPO and LPO that is catching the | | | | 7. Knowledge transfer, application of |
| attention of the world today. India with its strength in | | | | know-how while at process transition stage or |
| outsourcing business and a relative stronger position in | | | | implementation stage leads costs over-run |
| Automobile, Hi-tech telecom and Aerospace industry is | | | | Base challenges : |
| well saddled to become an indomitable force globally | | | | Talent level |
| for Engineering services outsourcing work. | | | | a. Engineering education is about knowledge, |
| | | | | know-how, and character. Mushrooming of |
| Various Industry surveys suggest that the current | | | | educational institutes in India couldn’t keep up the |
| value of design services, which is US$700 billion, and | | | | quality of educationb. With an intake of more |
| the expected value of design services, by 2020 will be | | | | than 5 lac students in bachelor programs, over 30,000 |
| US1 trillion with Design, R&D, Product development and | | | | in masters and around 1200 in PhDs programs, the |
| Innovation as some areas of focus. | | | | supply still seem to be insufficient considering future |
| | | | | opportunities since ESO, manufacturing, IT and BPO |
| For instance with R&D focus industries like IT, health | | | | industries showing signs of strong growth |
| life sciences, defense systems, telecom, aerospace, | | | | storyc. Research facilities mostly found to |
| automobile and industrial engineering the opportunities | | | | be either inadequate or misaligned with the industry |
| are growing amidst major corporations setting | | | | needsd. Dearth of well-qualified faculty and |
| R&D centers (even terming them as ODCs | | | | the student faculty ratio at Master or research level is |
| sometimes) in various offshore locations. | | | | at sub-optimal levele. Amenities required |
| | | | | providing quality education like laboratories, tools, |
| | | | | machines etc., need a complete revamp across |
| | | | | university and institution levels.f. Facelift the |
| Mushrooming of such offshore business models, | | | | status of various engineering related vocational |
| growth in number of patents, royalty agreements, | | | | courses by resurrecting the course curricula, industry |
| transformation of global businesses with outcome | | | | interface and employability |
| based research focus etc., over the last decade is a | | | | |
| strong signal of an underlying opportunity in R&D | | | | Market place: |
| outsourcing market which in India is approximately | | | | a. Creation of ecosystemb. |
| about $8B (2008). | | | | Engineering work may get outsourced to captive |
| | | | | centers significantlyc. Smaller companies |
| ESO as an emerging industry demands a great mix of | | | | and small work of outsourcing can continue for some |
| skill, tools and experience akin to manufacturing | | | | more timed. Enhancing skills to procure high |
| support services in manufacturing industry. | | | | end work in aerospace, automotive and hi-tech domain |
| Harnessing such opportunities is only possible in | | | | |
| creating an ecosystem that fosters process | | | | Process level: |
| development, innovation and deployment of | | | | a. Engineering expertise is core for many |
| best-in-class technology to delivery complex products | | | | companies outsourcing of it at large scale is only a |
| and services quicker, faster and smarter to worldwide | | | | long term betb. If engineering process at its |
| customers. | | | | core strength then its integration with other core |
| | | | | engineering processes/services is a real time |
| Growing with times ESO — India | | | | challengec. Although piece meal outsourcing |
| | | | | in design is happening for e.g. NPDI process, but it is still |
| Engineering services outsourcing in India is in its fledgling | | | | sometime before an integrated service model is |
| state. Although with a relatively stronger position in | | | | proposed for enhancing it beyond designd. |
| industries like Aerospace, Automobile and hi-tech | | | | Possibility of outsourcing will gain momentum, once it |
| telecom, focus on industries like construction/industrial, | | | | prepares to leave the shores but today the |
| utilities and others is equally required. Sourcing | | | | outsourcing of process is preferred in shores and |
| engineering services for design and engineering | | | | mostly piece meal.e. Legal & Policy / |
| requirements started getting momentum way back in | | | | Governmental, Trade and Regulatory affairs |
| 1980’s and it high time that an inclusive | | | | To conclude we need to understand that dynamism is |
| approach is followed for developing capability in | | | | in true reflection of ESO Industry globally. Today, it |
| sourcing engineering services globally. | | | | appears as one of the highly iterative, skill demanding, |
| | | | | technology intensive sunrise industry that needs |
| Service providers in India are expecting major | | | | sharper focus on value creation, time to market |
| opportunities in drawing conversions and CAD | | | | approach, value added services and high quality |
| migration assignments, 2&3D modeling and digital | | | | service delivery. |
| mock-ups, conceptual design, analysis and validation; | | | | After all as we see, India is at the inflection point to |
| complete design outsourcing, manufacturing co- | | | | define its destiny to become a poster boy for the |
| ordination, CPC / PDM; overall process quality | | | | global engineering landscape. |
| improvement, e-engineering solutions, remote monitoring | | | | Focus ESO India: Some references |
| and system architecture development. Engineering | | | | 1. Promoting Engineered in India concept - |
| services at the plant automation and maintenance level | | | | 2. India has a market share of 20-25 per |
| (enterprise asset management) also appears promising | | | | cent in global sourcing market of engineering design |
| areas to focus for India. | | | | and product research and development, which is worth |
| | | | | around USD 150 billion in 2008 |
| | | | | 3. India comprises 28% of the suitable global |
| Many major ES companies in India are not only | | | | talent pool for off shoring services; 12% of the total |
| expanding breadth of services but also reconstituting | | | | engineering workforce is currently in India - Booz |
| the scope of work while approaching customers. | | | | Allen Hamilton study |
| With the advent of cloud computing technology it is | | | | 4. While in FY05, only $10-15 billion of |
| likely to gain traction and is expected to support many | | | | engineering services was off shored, the market is |
| service providers to develop an integrated service | | | | expected to grow to $150 -225 billion by 2020 - |
| offering across the value chain. | | | | .com |
| | | | | 5. Aerospace offers the greatest potential |
| On the other hand, buyers of such services apparently | | | | for expansion — though it is also one of the |
| are opting gradually to work with integrated service | | | | toughest opportunities to tap because of its close |
| providers in long term relationships. Comfort with | | | | association with the defense sector — Booz |
| supplier, predictability of service, efficiency in planning, | | | | Allen Hamilton |
| deployment and management of capital assets and | | | | 6. India's automotive engineering services |
| production appear to be some of the reasons of doing | | | | outsourcing industry is expected to grow at a |
| it. | | | | compounded annual growth rate (CAGR) of 32 per |
| | | | | cent by 2012-13, with the potential to generate |
| This is leading to maturity of the vendor landscape and | | | | revenues worth US$ 2.2 billion over the next two |
| evolution of the market that necessitates installed | | | | years — Frost & Sullivan |
| capacities of R&D services for far efficient services | | | | 7. The US$ 3.25 billion semiconductor design |
| to the customers. Companies with strong technology | | | | services market in India is expected to reach US$ 14.4 |
| play are likely to take leadership positions in gaining the | | | | billion by 2010, according to a report by ISA-Frost and |
| market share. | | | | Sullivan. |
| | | | | 8. Close to 200 semiconductor companies |
| Numerous industry reports present competition | | | | operating in India, about 120 of these are into |
| landscape of ESO comparing India with emerging | | | | chip-designing - iSuppli Corp. |
| destinations like China, South Korea, Singapore, Taiwan | | | | 9. India's chip design industry is on an |
| etc., on industry structure, talent, segment dynamics, | | | | accelerated growth curve, with market revenue |
| market players and so on. So far, India appears on | | | | expected to reach US$ 2.1 billion by 2010, rising at a |
| an overall basis to have specific and strategic | | | | Compound Annual Growth Rate of 29 percent, up |
| advantages. However, it is noteworthy to | | | | from US$ 596 million in 2005 - iSuppli Corp. |
| understand that leadership in today’s time is | | | | 10. Aerospace domain is a key component of |
| about the role you play than mere | | | | engineering outsourcing and India’s potential to |
| position’ on the global scene. | | | | become a significant global competitor with presently |
| | | | | around $1B of offshore outsourcing currently |
| If that is the case so, gaining leadership position and | | | | happening out of India in aerospace in the areas of |
| sustaining it on a long term basis is possible only when | | | | mechanical engineering and design, embedded |
| we understand the emerging industry landscape, align | | | | systems/avionics and components manufacturing put |
| with the same globally and develop capability in gaining | | | | together, this has the potential to double or even triple |
| leadership role. | | | | in the next few years. |
| | | | | |